Is AppFolio, Inc.'s (NASDAQ:APPF) CEO Pay Fair?

January 30, 2020

Jason Randall became the CEO of AppFolio, Inc. (NASDAQ:APPF) in 2017. 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. The aim of all this is to consider the appropriateness of CEO pay levels.

Check out our latest analysis for AppFolio

How Does Jason Randall's Compensation Compare With Similar Sized Companies?

Our data indicates that AppFolio, Inc. is worth US$4.5b, and total annual CEO compensation was reported as US$724k for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$360k. We looked at a group of companies with market capitalizations from US$2.0b to US$6.4b, and the median CEO total compensation was US$4.9m.

This would give shareholders a good impression of the company, since most similar size companies have to pay more, leaving less for shareholders. Though positive, it's important we delve into the performance of the actual business.

You can see, below, how CEO compensation at AppFolio has changed over time.

NasdaqGM:APPF CEO Compensation, January 31st 2020

Is AppFolio, Inc. Growing?

On average over the last three years, AppFolio, Inc. has grown earnings per share (EPS) by 97% each year (using a line of best fit). Its revenue is up 35% over last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. Shareholders might be interested in this free visualization of analyst forecasts.

Has AppFolio, Inc. Been A Good Investment?

Boasting a total shareholder return of 475% over three years, AppFolio, Inc. has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

AppFolio, Inc. is currently paying its CEO below what is normal for companies of its size.

Considering the underlying business is growing earnings, this would suggest the pay is modest. The pleasing shareholder returns are the cherry on top; you might even consider that Jason Randall deserves a raise! It is relatively rare to see a modestly paid CEO when performance is so impressive. But it is even better if company insiders are also buying shares with their own money. So you may want to check if insiders are buying AppFolio shares with their own money (free access).

Important note: AppFolio 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.

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.

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