Stock Analysis

Here's Why Shareholders May Want To Be Cautious With Increasing Ligand Pharmaceuticals Incorporated's (NASDAQ:LGND) CEO Pay Packet

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Shareholders of Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) will have been dismayed by the negative share price return over the last three years. In addition, the company's per-share earnings growth is not looking good, despite growing revenues. Shareholders will have a chance to take their concerns to the board at the next AGM on 04 June 2021 and vote on resolutions including executive compensation, which studies show may have an impact on company performance. Here's our take on why we think shareholders might be hesitant about approving a raise at the moment.

View our latest analysis for Ligand Pharmaceuticals

Comparing Ligand Pharmaceuticals Incorporated's CEO Compensation With the industry

At the time of writing, our data shows that Ligand Pharmaceuticals Incorporated has a market capitalization of US$2.0b, and reported total annual CEO compensation of US$5.8m for the year to December 2020. That's a notable decrease of 14% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$668k.

In comparison with other companies in the industry with market capitalizations ranging from US$1.0b to US$3.2b, the reported median CEO total compensation was US$4.7m. This suggests that Ligand Pharmaceuticals remunerates its CEO largely in line with the industry average. Furthermore, John Higgins directly owns US$37m worth of shares in the company, implying that they are deeply invested in the company's success.

Component20202019Proportion (2020)
Salary US$668k US$648k 11%
Other US$5.2m US$6.1m 89%
Total CompensationUS$5.8m US$6.8m100%

On an industry level, roughly 19% of total compensation represents salary and 81% is other remuneration. Ligand Pharmaceuticals sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

NasdaqGM:LGND CEO Compensation May 29th 2021

A Look at Ligand Pharmaceuticals Incorporated's Growth Numbers

Over the last three years, Ligand Pharmaceuticals Incorporated has not seen its earnings per share change much, though they have deteriorated slightly. It achieved revenue growth of 90% over the last year.

The decrease in EPS could be a concern for some investors. On the other hand, the strong revenue growth suggests the business is growing. It's hard to reach a conclusion about business performance right now. This may be one to watch. 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 Ligand Pharmaceuticals Incorporated Been A Good Investment?

Few Ligand Pharmaceuticals Incorporated shareholders would feel satisfied with the return of -40% over three years. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

The loss to shareholders over the past three years is certainly concerning and possibly has something to do with the fact that the company's earnings haven't grown. Shareholders will get the chance at the upcoming AGM to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 5 warning signs (and 2 which shouldn't be ignored) in Ligand Pharmaceuticals we think you should know about.

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