Shareholders will probably not be too impressed with the underwhelming results at Natural Health Trends Corp. (NASDAQ:NHTC) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 11 May 2021. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. From our analysis, we think CEO compensation may need a review in light of the recent performance.
How Does Total Compensation For Chris T. Sharng Compare With Other Companies In The Industry?
According to our data, Natural Health Trends Corp. has a market capitalization of US$80m, and paid its CEO total annual compensation worth US$1.0m over the year to December 2020. We note that's a decrease of 27% compared to last year. Notably, the salary which is US$1.00m, represents most of the total compensation being paid.
In comparison with other companies in the industry with market capitalizations under US$200m, the reported median total CEO compensation was US$228k. Accordingly, our analysis reveals that Natural Health Trends Corp. pays Chris T. Sharng north of the industry median. What's more, Chris T. Sharng holds US$6.5m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Speaking on an industry level, nearly 61% of total compensation represents salary, while the remainder of 39% is other remuneration. Investors will find it interesting that Natural Health Trends pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
Natural Health Trends Corp.'s Growth
Over the last three years, Natural Health Trends Corp. has shrunk its earnings per share by 66% per year. Its revenue is down 20% over the previous year.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Natural Health Trends Corp. Been A Good Investment?
Few Natural Health Trends Corp. shareholders would feel satisfied with the return of -50% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
Natural Health Trends pays its CEO a majority of compensation through a salary. Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 5 warning signs for Natural Health Trends (of which 1 is significant!) that you should know about in order to have a holistic understanding of the stock.
Important note: Natural Health Trends is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
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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. 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.
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