Is NeoPhotonics Corporation (NYSE:NPTN) Overpaying Its CEO?

Tim Jenks has been the CEO of NeoPhotonics Corporation (NYSE:NPTN) since 1998. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we’ll look at a snap shot of the business growth. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

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See our latest analysis for NeoPhotonics

How Does Tim Jenks’s Compensation Compare With Similar Sized Companies?

Our data indicates that NeoPhotonics Corporation is worth US$189m, and total annual CEO compensation is US$2.0m. (This figure is for the year to December 2018). Notably, that’s an increase of 30% over the year before. While we always look at total compensation first, we note that the salary component is less, at US$505k. We looked at a group of companies with market capitalizations from US$100m to US$400m, and the median CEO total compensation was US$1.1m.

As you can see, Tim Jenks is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean NeoPhotonics Corporation is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see a visual representation of the CEO compensation at NeoPhotonics, below.

NYSE:NPTN CEO Compensation, May 22nd 2019
NYSE:NPTN CEO Compensation, May 22nd 2019

Is NeoPhotonics Corporation Growing?

On average over the last three years, NeoPhotonics Corporation has shrunk earnings per share by 72% each year (measured with a line of best fit). Its revenue is up 15% over last year.

Sadly for shareholders, earnings per share are actually down, over three years. While the revenue growth is good to see, it is outweighed by the fact that earnings per share are down, over three years. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. You might want to check this free visual report on analyst forecasts for future earnings.

Has NeoPhotonics Corporation Been A Good Investment?

With a three year total loss of 58%, NeoPhotonics Corporation would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary…

We compared total CEO remuneration at NeoPhotonics Corporation with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us.

Over the same period, investors would have come away with nothing in the way of share price gains. And we’d be remiss not to note that the CEO remuneration has increased on last year. In our opinion the CEO might be paid too generously! CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling NeoPhotonics (free visualization of insider trades).

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.