In 2012 Chip Paucek was appointed CEO of 2U, Inc. (NASDAQ:TWOU). 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. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.
See our latest analysis for 2U
How Does Chip Paucek's Compensation Compare With Similar Sized Companies?
Our data indicates that 2U, Inc. is worth US$1.1b, and total annual CEO compensation is US$17m. (This number is for the twelve months until December 2018). While we always look at total compensation first, we note that the salary component is less, at US$541k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$400m to US$1.6b. The median total CEO compensation was US$2.7m.
As you can see, Chip Paucek is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean 2U, Inc. 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.
The graphic below shows how CEO compensation at 2U has changed from year to year.
Is 2U, Inc. Growing?
Over the last three years 2U, Inc. has shrunk its earnings per share by an average of 23% per year (measured with a line of best fit). In the last year, its revenue is up 38%.
As investors, we are a bit wary of companies that have lower earnings per share, over three years. But in contrast the revenue growth is strong, suggesting future potential for earnings growth. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching.
Has 2U, Inc. Been A Good Investment?
Since shareholders would have lost about 50% over three years, some 2U, Inc. shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn't be too generous with CEO compensation.
In Summary...
We compared the total CEO remuneration paid by 2U, Inc., and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.
Over the last three years, shareholder returns have been downright disappointing, and the underlying business has failed to impress us. Although we'd stop short of calling it inappropriate, we think the CEO compensation is probably more on the generous side of things. Shareholders may want to check for free if 2U insiders are buying or selling shares.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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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.