Stock Analysis

We Think RE/MAX Holdings, Inc.'s (NYSE:RMAX) CEO Compensation Package Needs To Be Put Under A Microscope

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The results at RE/MAX Holdings, Inc. (NYSE:RMAX) have been quite disappointing recently and CEO Adam Contos bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 26 May 2021. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. The data we present below explains why we think CEO compensation is not consistent with recent performance.

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How Does Total Compensation For Adam Contos Compare With Other Companies In The Industry?

At the time of writing, our data shows that RE/MAX Holdings, Inc. has a market capitalization of US$1.1b, and reported total annual CEO compensation of US$2.4m for the year to December 2020. That's a notable increase of 16% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$700k.

On comparing similar companies from the same industry with market caps ranging from US$400m to US$1.6b, we found that the median CEO total compensation was US$3.1m. This suggests that RE/MAX Holdings remunerates its CEO largely in line with the industry average. Furthermore, Adam Contos directly owns US$1.1m worth of shares in the company.

Component20202019Proportion (2020)
Salary US$700k US$650k 29%
Other US$1.7m US$1.4m 71%
Total CompensationUS$2.4m US$2.1m100%

Talking in terms of the industry, salary represented approximately 29% of total compensation out of all the companies we analyzed, while other remuneration made up 71% of the pie. Our data reveals that RE/MAX Holdings allocates salary more or less in line with the wider market. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

NYSE:RMAX CEO Compensation May 20th 2021

RE/MAX Holdings, Inc.'s Growth

Over the last three years, RE/MAX Holdings, Inc. has shrunk its earnings per share by 5.1% per year. In the last year, its revenue is down 4.7%.

Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has RE/MAX Holdings, Inc. Been A Good Investment?

The return of -30% over three years would not have pleased RE/MAX Holdings, Inc. shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. 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.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 5 warning signs for RE/MAX Holdings that investors should be aware of in a dynamic business environment.

Important note: RE/MAX Holdings is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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