In 2004 Fermi Wang was appointed CEO of Ambarella, Inc. (NASDAQ:AMBA). First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.
Check out our latest analysis for Ambarella
How Does Fermi Wang's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Ambarella, Inc. has a market cap of US$1.9b, and reported total annual CEO compensation of US$4.1m for the year to January 2019. While we always look at total compensation first, we note that the salary component is less, at US$357k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We examined companies with market caps from US$1.0b to US$3.2b, and discovered that the median CEO total compensation of that group was US$4.0m.
So Fermi Wang is paid around the average of the companies we looked at. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance. You might want to check this free visual report on analyst forecasts for future earnings.
The graphic below shows how CEO compensation at Ambarella has changed from year to year.
Is Ambarella, Inc. Growing?
Over the last three years Ambarella, Inc. has shrunk its earnings per share by an average of 105% per year (measured with a line of best fit). It saw its revenue drop 24% over the last year.
Sadly for shareholders, earnings per share are actually down, over three years. 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.
Has Ambarella, Inc. Been A Good Investment?
Given the total loss of 7.4% over three years, many shareholders in Ambarella, Inc. are probably rather dissatisfied, to say the least. It therefore might be upsetting for shareholders if the CEO were paid generously.
In Summary...
Remuneration for Fermi Wang is close enough to the median pay for a CEO of a similar sized company .
After looking at EPS and total shareholder returns, it's certainly hard to argue the company has performed well, since both metrics are down. Suffice it to say, we don't think the CEO is underpaid! Shareholders may want to check for free if Ambarella insiders are buying or selling shares.
If you want to buy a stock that is better than Ambarella, this free list of high return, low debt companies is a great place to look.
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