Stock Analysis

We Discuss Why Stratus Properties Inc.'s (NASDAQ:STRS) CEO Compensation May Be Closely Reviewed

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NasdaqGS:STRS
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Stratus Properties Inc. (NASDAQ:STRS) has not performed well recently and CEO Beau Armstrong will probably need to up their game. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 04 June 2021. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. From our analysis, we think CEO compensation may need a review in light of the recent performance.

Check out our latest analysis for Stratus Properties

Comparing Stratus Properties Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that Stratus Properties Inc. has a market capitalization of US$224m, and reported total annual CEO compensation of US$1.7m for the year to December 2020. Notably, that's an increase of 9.7% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$500k.

On examining similar-sized companies in the industry with market capitalizations between US$100m and US$400m, we discovered that the median CEO total compensation of that group was US$1.4m. So it looks like Stratus Properties compensates Beau Armstrong in line with the median for the industry. What's more, Beau Armstrong holds US$14m 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$500k US$500k 29%
Other US$1.2m US$1.0m 71%
Total CompensationUS$1.7m US$1.5m100%

On an industry level, roughly 29% of total compensation represents salary and 71% is other remuneration. There isn't a significant difference between Stratus Properties and the broader market, in terms of salary allocation in the overall compensation package. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
NasdaqGS:STRS CEO Compensation May 30th 2021

A Look at Stratus Properties Inc.'s Growth Numbers

Over the last three years, Stratus Properties Inc. has shrunk its earnings per share by 66% per year. Its revenue is down 53% over the previous year.

The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Stratus Properties Inc. Been A Good Investment?

Given the total shareholder loss of 14% over three years, many shareholders in Stratus Properties Inc. are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We identified 3 warning signs for Stratus Properties (2 shouldn't be ignored!) that you should be aware of before investing here.

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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