What has ALT’s performance been like?Earnings is a powerful indication of ALT’s ability to invest shareholders’ funds and generate returns. Therefore I will use earnings as a proxy of Enright’s performance in the past year. Recently, ALT delivered negative earnings of -US$42.90M , which is a further decline from prior year’s loss of -US$10.00M. Furthermore, on average, ALT has been loss-making in the past, with a 5-year average EPS of -US$1.49. During times of unprofitability the company may be facing a period of reinvestment and growth, or it can be a signal of some headwind. In any case, CEO compensation should emulate the current condition of the business. From the latest financial report, Enright’s total compensation dropped by a meaningful rate of -34.60%, to US$333.88K.
Is ALT’s CEO overpaid relative to the market?
Though one size does not fit all, as remuneration should account for specific factors of the company and market, we can fashion a high-level benchmark to see if ALT deviates substantially from its peers. This outcome can help direct shareholders to ask the right question about Enright’s incentive alignment. Normally, a US small-cap is worth around $1B, generates earnings of $96M, and remunerates its CEO at roughly $2.7M annually. Typically I’d use market cap and profit as factors determining performance, however, ALT’s negative earnings reduces the usefulness of my formula. Analyzing the range of remuneration for small-cap executives, it seems like Enright is being paid within the bounds of reasonableness. Overall, though ALT is loss-making, it seems like the CEO’s pay is reflective of the appropriate level.
In the upcoming year’s AGM, shareholders should think about whether another increase in CEO pay is justified, should the board propose an executive pay raise. Will this raise take Enright’s pay beyond the bound of reasonableness, or will it help in retaining the talented executive? Being proactive in governance decisions is a key part to investing, and collectively, investors can make a big difference. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
- Governance: To find out more about ALT’s governance, look through our infographic report of the company’s board and management.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ALT? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!