Bill Nash became the CEO of CarMax, Inc. (NYSE:KMX) in 2016. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Next, we’ll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Bill Nash’s Compensation Compare With Similar Sized Companies?
At the time of writing our data says that CarMax, Inc. has a market cap of US$11b, and is paying total annual CEO compensation of US$7.8m. (This number is for the twelve months until February 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$1.0m. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. Once you start looking at very large companies, you need to take a broader range, because there simply aren’t that many of them.
That means Bill Nash receives fairly typical remuneration for the CEO of a large company. This doesn’t tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context.
The graphic below shows how CEO compensation at CarMax has changed from year to year.
Is CarMax, Inc. Growing?
On average over the last three years, CarMax, Inc. has grown earnings per share (EPS) by 12% each year (using a line of best fit). Its revenue is up 5.4% over last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It’s also good to see modest revenue growth, suggesting the underlying business is healthy. Shareholders might be interested in this free visualization of analyst forecasts.
Has CarMax, Inc. Been A Good Investment?
CarMax, Inc. has generated a total shareholder return of 25% over three years, so most shareholders would be reasonably content. But they probably don’t want to see the CEO paid more than is normal for companies around the same size.
Bill Nash is paid around what is normal the leaders of larger companies.
Shareholder returns could be better but shareholders would be pleased with the positive EPS growth. So upon reflection one could argue that the CEO pay is quite reasonable. Whatever your view on compensation, you might want to check if insiders are buying or selling CarMax shares (free trial).
Important note: CarMax may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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