Why ObsEva SA's (NASDAQ:OBSV) CEO Pay Matters To You

In 2012 Ernest Loumaye was appointed CEO of ObsEva SA (NASDAQ:OBSV). First, this article will compare CEO compensation with compensation at similar sized companies. Then we'll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.

Check out our latest analysis for ObsEva

How Does Ernest Loumaye's Compensation Compare With Similar Sized Companies?

According to our data, ObsEva SA has a market capitalization of US$109m, and paid its CEO total annual compensation worth US$2.7m over the year to December 2019. We think total compensation is more important but we note that the CEO salary is lower, at US$722k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations under US$200m, and the median CEO total compensation was US$616k.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where ObsEva stands. Speaking on an industry level, we can see that nearly 22% of total compensation represents salary, while the remainder of 78% is other remuneration. ObsEva does not set aside a larger portion of remuneration in the form of salary, maintaining the same rate as the wider market.

It would therefore appear that ObsEva SA pays Ernest Loumaye more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration 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 ObsEva, below.

Is ObsEva SA Growing?

Over the last three years ObsEva SA has shrunk its earnings per share by an average of 9.2% per year (measured with a line of best fit). Its revenue is up 6.7% over last year.

Unfortunately, earnings per share have trended lower over the last three years. And the modest revenue growth over 12 months isn't much comfort against the reduced earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. It could be important to check this free visual depiction of what analysts expect for the future.

Has ObsEva SA Been A Good Investment?

With a three year total loss of 72%, ObsEva SA would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

We compared the total CEO remuneration paid by ObsEva SA, and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us. Arguably worse, investors are without a positive return for the last three years. In our opinion the CEO might be paid too generously! On another note, ObsEva has 5 warning signs (and 2 which don't sit too well with us) we think you should know about.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

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.

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