How Is Cara Therapeutics' (NASDAQ:CARA) CEO Paid Relative To Peers?

By
Simply Wall St
Published
September 24, 2020
NasdaqGM:CARA

This article will reflect on the compensation paid to Derek Chalmers who has served as CEO of Cara Therapeutics, Inc. (NASDAQ:CARA) since 2004. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Cara Therapeutics.

View our latest analysis for Cara Therapeutics

Comparing Cara Therapeutics, Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that Cara Therapeutics, Inc. has a market capitalization of US$644m, and reported total annual CEO compensation of US$3.4m for the year to December 2019. Notably, that's an increase of 23% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$560k.

On comparing similar companies from the same industry with market caps ranging from US$400m to US$1.6b, we found that the median CEO total compensation was US$3.5m. From this we gather that Derek Chalmers is paid around the median for CEOs in the industry. What's more, Derek Chalmers holds US$12m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20192018Proportion (2019)
Salary US$560k US$542k 16%
Other US$2.9m US$2.2m 84%
Total CompensationUS$3.4m US$2.8m100%

Talking in terms of the industry, salary represented approximately 24% of total compensation out of all the companies we analyzed, while other remuneration made up 76% of the pie. In Cara Therapeutics' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
NasdaqGM:CARA CEO Compensation September 24th 2020

A Look at Cara Therapeutics, Inc.'s Growth Numbers

Over the last three years, Cara Therapeutics, Inc. has shrunk its earnings per share by 8.8% per year. Its revenue is up 19% over the last year.

The reduction in EPS, over three years, is arguably concerning. But on the other hand, revenue growth is strong, suggesting a brighter future. It's hard to reach a conclusion about business performance right now. This may be one to watch. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Cara Therapeutics, Inc. Been A Good Investment?

Cara Therapeutics, Inc. has generated a total shareholder return of 3.2% over three years, so most shareholders wouldn't be too disappointed. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

To Conclude...

As we noted earlier, Cara Therapeutics pays its CEO in line with similar-sized companies belonging to the same industry. But revenue growth for the company has been quite positive recently. That's why we were hoping for more robust shareholder returns at this time. Additionally, shareholders would want to keep their eyes on EPS, since growth has been negative for the metric for the last three years. But we don't think the CEO compensation is a problem, although shareholders might want to see more growth before agreeing that Derek should get a raise.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 3 warning signs for Cara Therapeutics (of which 1 is significant!) that you should know about in order to have a holistic understanding of the stock.

Important note: Cara Therapeutics 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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