Fermi Wang has been the CEO of Ambarella, Inc. (NASDAQ:AMBA) since 2004, 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 Ambarella.
Comparing Ambarella, Inc.’s CEO Compensation With the industry
According to our data, Ambarella, Inc. has a market capitalization of US$1.6b, and paid its CEO total annual compensation worth US$5.1m over the year to January 2020. That’s a notable increase of 25% on last year. While this analysis focuses on total compensation, it’s worth acknowledging that the salary portion is lower, valued at US$368k.
For comparison, other companies in the same industry with market capitalizations ranging between US$1.0b and US$3.2b had a median total CEO compensation of US$4.2m. So it looks like Ambarella compensates Fermi Wang in line with the median for the industry. Moreover, Fermi Wang also holds US$22m worth of Ambarella stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Speaking on an industry level, nearly 14% of total compensation represents salary, while the remainder of 86% is other remuneration. Ambarella pays a modest slice of remuneration through salary, as compared to the broader industry. It’s important to note that a slant towards non-salary compensation suggests that total pay is tied to the company’s performance.
A Look at Ambarella, Inc.’s Growth Numbers
Over the last three years, Ambarella, Inc. has shrunk its earnings per share by 110% per year. In the last year, its revenue is up 8.4%.
Overall this is not a very positive result for shareholders. The modest increase in revenue in the last year isn’t enough to make us overlook the disappointing change in earnings per share. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Ambarella, Inc. Been A Good Investment?
With a three year total loss of 11% for the shareholders, Ambarella, Inc. would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be lessto generous with CEO compensation.
As we touched on above, Ambarella, Inc. is currently paying a compensation that’s close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Meanwhile, earnings growth and shareholder returns have been in the red for the last three years. Considering overall performance, shareholders will likely hold off support for a raise until results improve.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We’ve identified 3 warning signs for Ambarella that investors should be aware of in a dynamic business environment.
Switching gears from Ambarella, if you’re hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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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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