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Gary Friedman has been the CEO of RH (NYSE:RH) since 2014. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Gary Friedman’s Compensation Compare With Similar Sized Companies?
At the time of writing our data says that RH has a market cap of US$2.8b, and is paying total annual CEO compensation of US$27m. (This is based on the year to 2018). While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$1.3m. We looked at a group of companies with market capitalizations from US$2.0b to US$6.4b, and the median CEO compensation was US$4.8m.
Thus we can conclude that Gary Friedman receives more in total compensation than the median of a group of companies in the same market, and of similar size to RH. However, this doesn’t necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.
The graphic below shows how CEO compensation at RH has changed from year to year.
Is RH Growing?
RH has increased its earnings per share (EPS) by an average of 35% a year, over the last three years (using a line of best fit). In the last year, its revenue is up 6.1%.
This shows that the company has improved itself over the last few years. Good news for shareholders. It’s also good to see modest revenue growth, suggesting the underlying business is healthy. You might want to check this free visual report on analyst forecasts for future earnings.
Has RH Been A Good Investment?
I think that the total shareholder return of 184%, over three years, would leave most RH shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We compared the total CEO remuneration paid by RH, and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.
However we must not forget that the EPS growth has been very strong over three years. Even better, returns to shareholders have been plentiful, over the same time period. As a result of this good performance, the CEO remuneration may well be quite reasonable. So you may want to check if insiders are buying RH shares with their own money (free access).
If you want to buy a stock that is better than RH, this free list of high return, low debt companies is a great place to look.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.