Is R1 RCM Inc.’s (NASDAQ:RCM) CEO Being Overpaid?

In 2016 Joe Flanagan was appointed CEO of R1 RCM Inc. (NASDAQ:RCM). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Next, we’ll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for R1 RCM

How Does Joe Flanagan’s Compensation Compare With Similar Sized Companies?

Our data indicates that R1 RCM Inc. is worth US$1.2b, and total annual CEO compensation is US$6.4m. (This figure is for the year to December 2017). While we always look at total compensation first, we note that the salary component is less, at US$595k. We examined companies with market caps from US$400m to US$1.6b, and discovered that the median CEO total compensation of that group was US$2.2m.

As you can see, Joe Flanagan is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean R1 RCM Inc. is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see, below, how CEO compensation at R1 RCM has changed over time.

NasdaqGS:RCM CEO Compensation, April 12th 2019
NasdaqGS:RCM CEO Compensation, April 12th 2019

Is R1 RCM Inc. Growing?

On average over the last three years, R1 RCM Inc. has shrunk earnings per share by 63% each year (measured with a line of best fit). Its revenue is up 93% over last year.

Investors should note that, over three years, earnings per share are down. On the other hand, the strong revenue growth suggests the business is growing. It’s hard to reach a conclusion about business performance right now. This may be one to watch. You might want to check this free visual report on analyst forecasts for future earnings.

Has R1 RCM Inc. Been A Good Investment?

I think that the total shareholder return of 345%, over three years, would leave most R1 RCM Inc. shareholders smiling. This strong performance might mean some shareholders don’t mind if the CEO were to be paid more than is normal for a company of its size.

In Summary…

We compared the total CEO remuneration paid by R1 RCM Inc., and compared it to remuneration at a group of similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

Over the last three years returns to investors have been great, though we might have liked stronger business growth. Considering this fine result for investors, we daresay the CEO compensation might be apt. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at R1 RCM.

Important note: R1 RCM may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.