We Think The Compensation For Schrödinger, Inc.'s (NASDAQ:SDGR) CEO Looks About Right

Key Insights

• Schrödinger's Annual General Meeting to take place on 18th of June
• Total pay for CEO Ramy Farid includes US$677.0k salary
• The total compensation is 60% less than the average for the industry
• Over the past three years, Schrödinger's EPS grew by 24% and over the past three years, the total loss to shareholders 72%

The performance at Schrödinger, Inc. (NASDAQ:SDGR) has been rather lacklustre of late and shareholders may be wondering what CEO Ramy Farid is planning to do about this. They will get a chance to exercise their voting power to influence the future direction of the company in the next AGM on 18th of June. Voting on executive pay could be a powerful way to influence management, as studies have shown that the right compensation incentives impact company performance. We have prepared some analysis below to show that CEO compensation looks to be reasonable.

View our latest analysis for Schrödinger

How Does Total Compensation For Ramy Farid Compare With Other Companies In The Industry?

At the time of writing, our data shows that Schrödinger, Inc. has a market capitalization of US$1.6b, and reported total annual CEO compensation of US$3.1m for the year to December 2023. That's a notable decrease of 20% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$677k.

In comparison with other companies in the American Healthcare Services industry with market capitalizations ranging from US$1.0b to US$3.2b, the reported median CEO total compensation was US$7.8m. That is to say, Ramy Farid is paid under the industry median. Furthermore, Ramy Farid directly owns US$3.9m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2022	Proportion (2023)
Salary	US$677k	US$651k	22%
Other	US$2.4m	US$3.3m	78%
Total Compensation	US$3.1m	US$3.9m	100%

On an industry level, around 34% of total compensation represents salary and 66% is other remuneration. Schrödinger sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Schrödinger, Inc.'s Growth Numbers

Over the past three years, Schrödinger, Inc. has seen its earnings per share (EPS) grow by 24% per year. It saw its revenue drop 4.4% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. While it would be good to see revenue growth, profits matter more in the end. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Schrödinger, Inc. Been A Good Investment?

With a total shareholder return of -72% over three years, Schrödinger, Inc. shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

The fact that shareholders have earned a negative share price return is certainly disconcerting. This diverges with the robust growth in EPS, suggesting that there is a large discrepancy between share price and fundamentals. There needs to be more focus by management and the board to examine why the share price has diverged from fundamentals. In the upcoming AGM, shareholders should take this opportunity to raise these concerns with the board and revisit their investment thesis with regards to the company.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 1 warning sign for Schrödinger that investors should look into moving forward.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.