Herschel Segal has been the CEO of DAVIDsTEA Inc. (NASDAQ:DTEA) since 2018, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for DAVIDsTEA.
Comparing DAVIDsTEA Inc.'s CEO Compensation With the industry
Our data indicates that DAVIDsTEA Inc. has a market capitalization of US$46m, and total annual CEO compensation was reported as CA$810k for the year to February 2020. That's a notable increase of 36% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at CA$400k.
On comparing similar-sized companies in the industry with market capitalizations below US$200m, we found that the median total CEO compensation was CA$1.6m. Accordingly, DAVIDsTEA pays its CEO under the industry median. What's more, Herschel Segal holds US$21m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, around 20% of total compensation represents salary and 80% is other remuneration. It's interesting to note that DAVIDsTEA pays out a greater portion of remuneration through salary, compared to the industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
DAVIDsTEA Inc.'s Growth
Over the last three years, DAVIDsTEA Inc. has shrunk its earnings per share by 41% per year. It saw its revenue drop 20% over the last year.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has DAVIDsTEA Inc. Been A Good Investment?
With a three year total loss of 58% for the shareholders, DAVIDsTEA Inc. would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
As we noted earlier, DAVIDsTEA pays its CEO lower than the norm for similar-sized companies belonging to the same industry. Over the last three years, shareholder returns have been downright disappointing, and EPSgrowth has been equally disappointing. Although we wouldn’t say CEO compensation is high, it’s tough to foresee shareholders warming up to thoughts of a bump anytime soon.
CEO compensation can have a massive impact on performance, but it's just one element. We did our research and spotted 2 warning signs for DAVIDsTEA that investors should look into moving forward.
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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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.
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