What has been the trend in PINC’s earnings?Earnings is a powerful indication of PINC’s ability to invest shareholders’ funds and generate returns. Therefore I will use earnings as a proxy of DeVore’s performance in the past year. In the past year, PINC produced a profit of US$200.37m , which is a rather significant decline from its prior year’s profit (excluding extraordinary items) of US$491.62m. Given that PINC has been loss-making in the past, hopefully a wane in profits isn’t a signal of a reverting trend. During times of abating earnings, the company may be incurring a period of reinvestment and growth, or it can be an indication of some headwind. In any case, CEO compensation should be reflective of the current condition of the business. In the most recent financial report, DeVore’s total compensation fell by -6.12%, to US$6.21m. In addition to this, DeVore’s pay is also made up of 70.80% non-cash elements, which means that fluctuations in PINC’s share price can affect the real level of what the CEO actually receives.
Is PINC’s CEO overpaid relative to the market?
Though one size does not fit all, since remuneration should account for specific factors of the company and market, we can estimate a high-level yardstick to see if PINC deviates substantially from its peers. This exercise helps investors ask the right question about DeVore’s incentive alignment. On average, a US mid-cap has a value of $5B, generates earnings of $290M and pays its CEO circa $5.3M annually. Based on PINC’s size and performance, in terms of market cap and earnings, it seems that DeVore is remunerated above other US CEOs of profitable mid-caps. Even though this is only a basic calculation, shareholders should be aware of this expense.
What this means for you:
CEO pay is one of those topics of high controversy. Nonetheless, it should be talked about with full transparency from the board to shareholders. Why is DeVore remuneration above that of similar companies? Is this justified? As a shareholder, you should be aware of how those that represent you (i.e. the board of directors) make decisions on CEO pay and whether their incentives are aligned with yours. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
- Governance: To find out more about PINC’s governance, look through our infographic report of the company’s board and management.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PINC? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!