Is Ardelyx, Inc.’s (NASDAQ:ARDX) CEO Salary Justified?

Mike Raab has been the CEO of Ardelyx, Inc. (NASDAQ:ARDX) since 2009. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

Check out our latest analysis for Ardelyx

How Does Mike Raab’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Ardelyx, Inc. has a market cap of US$147m, and is paying total annual CEO compensation of US$4.2m. (This figure is for the year to December 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$575k. We examined a group of similar sized companies, with market capitalizations of below US$200m. The median CEO total compensation in that group is US$483k.

Thus we can conclude that Mike Raab receives more in total compensation than the median of a group of companies in the same market, and of similar size to Ardelyx, Inc.. However, this doesn’t necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

You can see a visual representation of the CEO compensation at Ardelyx, below.

NasdaqGM:ARDX CEO Compensation, August 14th 2019
NasdaqGM:ARDX CEO Compensation, August 14th 2019

Is Ardelyx, Inc. Growing?

Over the last three years Ardelyx, Inc. has grown its earnings per share (EPS) by an average of 30% per year (using a line of best fit). It has seen most of its revenue evaporate over the past year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn’t ideal, but it is the bottom line that counts most in business.

Has Ardelyx, Inc. Been A Good Investment?

Given the total loss of 77% over three years, many shareholders in Ardelyx, Inc. are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.

In Summary…

We examined the amount Ardelyx, Inc. pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

However we must not forget that the EPS growth has been very strong over three years. Having said that, shareholders may be disappointed with the weak returns over the last three years. While EPS is positive, we’d say shareholders would want better returns before the CEO is paid much more. Whatever your view on compensation, you might want to check if insiders are buying or selling Ardelyx shares (free trial).

If you want to buy a stock that is better than Ardelyx, this free list of high return, low debt companies is a great place to look.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.