Here's Why We Think ACADIA Pharmaceuticals Inc.'s (NASDAQ:ACAD) CEO Compensation Looks Fair for the time being

By
Simply Wall St
Published
June 15, 2021
NasdaqGS:ACAD
Source: Shutterstock

Performance at ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) has been reasonably good and CEO Steve Davis has done a decent job of steering the company in the right direction. As shareholders go into the upcoming AGM on 22 June 2021, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. We present our case of why we think CEO compensation looks fair.

See our latest analysis for ACADIA Pharmaceuticals

Comparing ACADIA Pharmaceuticals Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that ACADIA Pharmaceuticals Inc. has a market capitalization of US$4.2b, and reported total annual CEO compensation of US$7.8m for the year to December 2020. That's mostly flat as compared to the prior year's compensation. We think total compensation is more important but our data shows that the CEO salary is lower, at US$768k.

On comparing similar companies from the same industry with market caps ranging from US$2.0b to US$6.4b, we found that the median CEO total compensation was US$6.7m. So it looks like ACADIA Pharmaceuticals compensates Steve Davis in line with the median for the industry. Moreover, Steve Davis also holds US$1.3m worth of ACADIA Pharmaceuticals stock directly under their own name.

Component20202019Proportion (2020)
Salary US$768k US$744k 10%
Other US$7.0m US$6.9m 90%
Total CompensationUS$7.8m US$7.6m100%

On an industry level, roughly 20% of total compensation represents salary and 80% is other remuneration. ACADIA Pharmaceuticals pays a modest slice of remuneration through salary, as compared to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
NasdaqGS:ACAD CEO Compensation June 16th 2021

ACADIA Pharmaceuticals Inc.'s Growth

ACADIA Pharmaceuticals Inc.'s earnings per share (EPS) grew 9.3% per year over the last three years. It achieved revenue growth of 25% over the last year.

It's hard to interpret the strong revenue growth as anything other than a positive. With that in mind, the modestly improving EPS seems positive. We wouldn't say this is necessarily top notch growth, but it is certainly promising. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has ACADIA Pharmaceuticals Inc. Been A Good Investment?

Most shareholders would probably be pleased with ACADIA Pharmaceuticals Inc. for providing a total return of 54% over three years. 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...

Given that the company's overall performance has been reasonable, the CEO remuneration policy might not be shareholders' central point of focus in the upcoming AGM. Despite the pleasing results, we still think that any proposed increases to CEO compensation will be examined based on a case by case basis and linked to performance outcomes.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 2 warning signs for ACADIA Pharmaceuticals that you should be aware of before investing.

Important note: ACADIA Pharmaceuticals 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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