In the past three years, the share price of Heron Therapeutics, Inc. (NASDAQ:HRTX) has struggled to grow and now shareholders are sitting on a loss. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. These are some of the concerns that shareholders may want to bring up at the next AGM held on 17 June 2021. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.
Comparing Heron Therapeutics, Inc.'s CEO Compensation With the industry
At the time of writing, our data shows that Heron Therapeutics, Inc. has a market capitalization of US$1.5b, and reported total annual CEO compensation of US$5.3m for the year to December 2020. That's a notable decrease of 8.9% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$677k.
On examining similar-sized companies in the industry with market capitalizations between US$1.0b and US$3.2b, we discovered that the median CEO total compensation of that group was US$4.8m. This suggests that Heron Therapeutics remunerates its CEO largely in line with the industry average. Furthermore, Barry Quart directly owns US$1.4m worth of shares in the company.
Speaking on an industry level, nearly 20% of total compensation represents salary, while the remainder of 80% is other remuneration. It's interesting to note that Heron Therapeutics allocates a smaller portion of compensation to salary 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.
Heron Therapeutics, Inc.'s Growth
Heron Therapeutics, Inc. has seen its earnings per share (EPS) increase by 9.5% a year over the past three years. In the last year, its revenue is down 40%.
We would prefer it if there was revenue growth, but the modest improvement in EPS is good. 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 Heron Therapeutics, Inc. Been A Good Investment?
With a total shareholder return of -49% over three years, Heron Therapeutics, Inc. shareholders would by and large be disappointed. So shareholders would probably want the company to be less generous with CEO compensation.
Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would be keen to know what's holding the stock back when earnings have grown. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We did our research and spotted 1 warning sign for Heron Therapeutics that investors should look into moving forward.
Important note: Heron 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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