Is China Green Agriculture, Inc.'s (NYSE:CGA) CEO Paid Enough Relative To Peers?

By
Simply Wall St
Published
June 02, 2020

In 2017, Richard Li was appointed CEO of China Green Agriculture, Inc. (NYSE:CGA). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we'll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for China Green Agriculture

How Does Richard Li's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that China Green Agriculture, Inc. has a market cap of US$16m, and reported total annual CEO compensation of US$420k for the year to June 2019. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$300k. We looked at a group of companies with market capitalizations under US$200m, and the median CEO total compensation was US$593k.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where China Green Agriculture stands. Speaking on an industry level, we can see that nearly 19% of total compensation represents salary, while the remainder of 81% is other remuneration. China Green Agriculture is paying a higher share of its remuneration through a salary in comparison to the overall industry.

So Richard Li receives a similar amount to the median CEO pay, amongst the companies we looked at. This doesn't tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context. You can see a visual representation of the CEO compensation at China Green Agriculture, below.

NYSE:CGA CEO Compensation June 2nd 2020

Is China Green Agriculture, Inc. Growing?

Over the last three years China Green Agriculture, Inc. has shrunk its earnings per share by an average of 112% per year (measured with a line of best fit). Its revenue is down 12% over last year.

Unfortunately, earnings per share have trended lower over the last three years. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has China Green Agriculture, Inc. Been A Good Investment?

Given the total loss of 83% over three years, many shareholders in China Green Agriculture, Inc. are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Richard Li is paid around what is normal for the leaders of comparable size companies.

The company isn't growing EPS, and shareholder returns have been disappointing. Few would argue that it's wise for the company to pay any more, before returns improve. On another note, China Green Agriculture has 4 warning signs (and 2 which are concerning) we think you should know about.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity 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. Thank you for reading.

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