What has been the trend in SELB’s earnings?Performance can be measured based on factors such as earnings and total shareholder return (TSR). I believe earnings is a cleaner proxy, since many factors can impact share price, and therefore, TSR. Most recently, SELB delivered negative earnings of -US$66.07M , which is a further decline from prior year’s loss of -US$46.08M. Moreover, on average, SELB has been loss-making in the past, with a 5-year average EPS of -US$7.75. During times of unprofitability the company may be going through a period of reinvestment and growth, or it can be a sign of some headwind. Regardless, CEO compensation should be reflective of the current state of the business. In the most recent financial statments, Cautreels’s total remuneration rose by a mere 1.14% to US$1.99M. Although I couldn’t find information on the composition of Cautreels’s pay, if some portion were non-cash items such as stocks and options, then variabilities in SELB’s share price can affect the actual level of what the CEO actually receives.
Is SELB’s CEO overpaid relative to the market?
Despite the fact that no standard benchmark exists, as remuneration should account for specific factors of the company and market, we can evaluate a high-level base line to see if SELB is an outlier. This outcome can help shareholders ask the right question about Cautreels’s incentive alignment. Generally, a US small-cap is worth around $1B, creates earnings of $96M, and remunerates its CEO circa $2.7M per annum. Normally I’d use market cap and profit as factors determining performance, however, SELB’s negative earnings reduces the effectiveness of this method. Analyzing the range of remuneration for small-cap executives, it seems like Cautreels is paid aptly compared to those in similar-sized companies. On the whole, though SELB is unprofitable, it seems like the CEO’s pay is reflective of the appropriate level.
Board members are the voice of shareholders. Although CEO pay doesn’t necessarily make a big dent in your investment thesis in SELB, proper governance on behalf of your investment should be a key concern. These decisions made by top management and directors flow down into financials which impact returns to investors. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Governance: To find out more about SELB’s governance, look through our infographic report of the company’s board and management.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SELB? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!