Stock Analysis

It's Unlikely That The CEO Of Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) Will See A Huge Pay Rise This Year

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In the past three years, the share price of Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) has struggled to generate growth for its shareholders. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 10 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.

Check out our latest analysis for Vanda Pharmaceuticals

How Does Total Compensation For Mihael Polymeropoulos Compare With Other Companies In The Industry?

According to our data, Vanda Pharmaceuticals Inc. has a market capitalization of US$985m, and paid its CEO total annual compensation worth US$2.9m over the year to December 2020. Notably, that's a decrease of 32% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$746k.

For comparison, other companies in the same industry with market capitalizations ranging between US$400m and US$1.6b had a median total CEO compensation of US$3.3m. This suggests that Vanda Pharmaceuticals remunerates its CEO largely in line with the industry average. What's more, Mihael Polymeropoulos holds US$18m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20202019Proportion (2020)
Salary US$746k US$721k 26%
Other US$2.2m US$3.6m 74%
Total CompensationUS$2.9m US$4.3m100%

On an industry level, roughly 20% of total compensation represents salary and 80% is other remuneration. According to our research, Vanda Pharmaceuticals has allocated a higher percentage of pay to salary in comparison to the wider industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

NasdaqGM:VNDA CEO Compensation June 3rd 2021

Vanda Pharmaceuticals Inc.'s Growth

Vanda Pharmaceuticals Inc. has seen its earnings per share (EPS) increase by 39% a year over the past three years. It achieved revenue growth of 6.5% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Vanda Pharmaceuticals Inc. Been A Good Investment?

Given the total shareholder loss of 1.6% over three years, many shareholders in Vanda Pharmaceuticals Inc. are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. 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. The upcoming AGM will be a chance for shareholders 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.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 2 warning signs for Vanda Pharmaceuticals that investors should think about before committing capital to this stock.

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.

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