Stock Analysis

We Think Shareholders Are Less Likely To Approve A Large Pay Rise For Rapid7, Inc.'s (NASDAQ:RPD) CEO For Now

  •  Updated
NasdaqGM:RPD
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CEO Corey Thomas has done a decent job of delivering relatively good performance at Rapid7, Inc. (NASDAQ:RPD) recently. As shareholders go into the upcoming AGM on 10 June 2021, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. However, some shareholders will still be cautious of paying the CEO excessively.

View our latest analysis for Rapid7

Comparing Rapid7, Inc.'s CEO Compensation With the industry

Our data indicates that Rapid7, Inc. has a market capitalization of US$4.6b, and total annual CEO compensation was reported as US$8.9m for the year to December 2020. We note that's an increase of 58% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$443k.

For comparison, other companies in the same industry with market capitalizations ranging between US$2.0b and US$6.4b had a median total CEO compensation of US$5.6m. Hence, we can conclude that Corey Thomas is remunerated higher than the industry median. What's more, Corey Thomas holds US$27m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20202019Proportion (2020)
Salary US$443k US$375k 5%
Other US$8.4m US$5.2m 95%
Total CompensationUS$8.9m US$5.6m100%

Speaking on an industry level, nearly 11% of total compensation represents salary, while the remainder of 89% is other remuneration. Investors may find it interesting that Rapid7 paid a marginal salary to Corey Thomas, over the past year, focusing on non-salary compensation instead. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
NasdaqGM:RPD CEO Compensation June 3rd 2021

Rapid7, Inc.'s Growth

Over the last three years, Rapid7, Inc. has shrunk its earnings per share by 20% per year. Its revenue is up 25% over the last year.

The reduction in EPS, over three years, is arguably concerning. But on the other hand, revenue growth is strong, suggesting a brighter future. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. 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 Rapid7, Inc. Been A Good Investment?

Boasting a total shareholder return of 161% over three years, Rapid7, Inc. has done well by shareholders. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

Rapid7 prefers rewarding its CEO through non-salary benefits. Although the company has performed relatively well, we still think there are some areas that could be improved. Until EPS growth picks back up, we think shareholders may find it hard to justify increasing CEO pay given that they are already paid above industry average.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 3 warning signs for Rapid7 (1 is significant!) that you should be aware of before investing here.

Switching gears from Rapid7, 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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