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Shareholders Will Probably Hold Off On Increasing Otonomy, Inc.'s (NASDAQ:OTIC) CEO Compensation For The Time Being
Shareholders of Otonomy, Inc. (NASDAQ:OTIC) will have been dismayed by the negative share price return over the last three years. 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 22 June 2021. They could also influence management through voting on resolutions such as executive remuneration. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.
See our latest analysis for Otonomy
Comparing Otonomy, Inc.'s CEO Compensation With the industry
At the time of writing, our data shows that Otonomy, Inc. has a market capitalization of US$134m, and reported total annual CEO compensation of US$2.9m for the year to December 2020. Notably, that's an increase of 33% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$568k.
On comparing similar-sized companies in the industry with market capitalizations below US$200m, we found that the median total CEO compensation was US$727k. Hence, we can conclude that David Weber is remunerated higher than the industry median. What's more, David Weber holds US$115k worth of shares in the company in their own name.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | US$568k | US$546k | 20% |
| Other | US$2.3m | US$1.6m | 80% |
| Total Compensation | US$2.9m | US$2.2m | 100% |
Talking in terms of the industry, salary represented approximately 28% of total compensation out of all the companies we analyzed, while other remuneration made up 72% of the pie. Otonomy pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Otonomy, Inc.'s Growth
Otonomy, Inc.'s earnings per share (EPS) grew 24% per year over the last three years. Its revenue is down 64% over the previous year.
Shareholders would be glad to know that the company has improved itself over the last few years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Otonomy, Inc. Been A Good Investment?
Few Otonomy, Inc. shareholders would feel satisfied with the return of -46% over three years. This suggests it would be unwise for the company to pay the CEO too generously.
To Conclude...
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. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 4 warning signs for Otonomy you should be aware of, and 3 of them are significant.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
About OTCPK:OTIC
Otonomy
Otonomy, Inc., a biopharmaceutical company, develops therapeutics for neurotology in the United States.
Mediocre balance sheet and slightly overvalued.
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