Gabe Tirador became the CEO of Mercury General Corporation (NYSE:MCY) in 2007, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether Mercury General pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing Mercury General Corporation's CEO Compensation With the industry
At the time of writing, our data shows that Mercury General Corporation has a market capitalization of US$2.3b, and reported total annual CEO compensation of US$1.7m for the year to December 2019. That's a notable increase of 12% on last year. Notably, the salary which is US$1.05m, represents most of the total compensation being paid.
On examining similar-sized companies in the industry with market capitalizations between US$1.0b and US$3.2b, we discovered that the median CEO total compensation of that group was US$3.8m. In other words, Mercury General pays its CEO lower than the industry median. Furthermore, Gabe Tirador directly owns US$1.8m worth of shares in the company.
Speaking on an industry level, nearly 16% of total compensation represents salary, while the remainder of 84% is other remuneration. Mercury General is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
Mercury General Corporation's Growth
Over the past three years, Mercury General Corporation has seen its earnings per share (EPS) grow by 34% per year. In the last year, its revenue changed by just 0.5%.
This demonstrates that the company has been improving recently and is good news for the shareholders. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. 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 Mercury General Corporation Been A Good Investment?
Given the total shareholder loss of 14% over three years, many shareholders in Mercury General Corporation are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.
As we touched on above, Mercury General Corporation is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. However we must not forget that the EPS growth has been very strong over three years. Considering EPS are on the up, we would say Gabe is compensated fairly. Shareholders, though, would ideally like to see shareholder returns head north before they agree to any raise.
Important note: Mercury General 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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