Lip-Bu Tan has been the CEO of Cadence Design Systems, Inc. (NASDAQ:CDNS) since 2009. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Then we’ll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
Check out our latest analysis for Cadence Design Systems
Want to help shape the future of investing tools and platforms? Take the survey and be part of one of the most advanced studies of stock market investors to date.
How Does Lip-Bu Tan’s Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Cadence Design Systems, Inc. has a market cap of US$13b, and is paying total annual CEO compensation of US$8.0m. (This number is for the twelve months until 2017). While we always look at total compensation first, we note that the salary component is less, at US$700k. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO compensation to be US$11m. There aren’t very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
So Lip-Bu Tan is paid around the average of the companies we looked at. This doesn’t tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context.
The graphic below shows how CEO compensation at Cadence Design Systems has changed from year to year.
Is Cadence Design Systems, Inc. Growing?
Over the last three years Cadence Design Systems, Inc. has shrunk its earnings per share by an average of 2.6% per year. It achieved revenue growth of 8.4% over the last year.
The lack of earnings per share growth in the last three years is unimpressive. The modest increase in revenue in the last year isn’t enough to make me overlook the disappointing change in earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO.
It could be important to check this free visual depiction of what analysts expect for the future.
Has Cadence Design Systems, Inc. Been A Good Investment?
Boasting a total shareholder return of 139% over three years, Cadence Design Systems, Inc. has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
In Summary…
Lip-Bu Tan is paid around the same as most CEOs of large companies.
The company isn’t growing earnings per share, but shareholder returns have been strong over the last three years. So we doubt many are complaining about the fairly normal CEO pay. So you may want to check if insiders are buying Cadence Design Systems shares with their own money (free access).
Of course, the past can be informative so you might be interested in considering this analytical visualization showing the company history of earnings and revenue.
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 editorial-team@simplywallst.com.