We Discuss Why Ooma, Inc.'s (NYSE:OOMA) CEO Compensation May Be Closely Reviewed

Key Insights

• Ooma to hold its Annual General Meeting on 5th of June
• Total pay for CEO Eric Stang includes US$593.8k salary
• The overall pay is comparable to the industry average
• Ooma's three-year loss to shareholders was 4.8% while its EPS was down 44% over the past three years

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The results at Ooma, Inc. (NYSE:OOMA) have been quite disappointing recently and CEO Eric Stang bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 5th of June. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

See our latest analysis for Ooma

How Does Total Compensation For Eric Stang Compare With Other Companies In The Industry?

At the time of writing, our data shows that Ooma, Inc. has a market capitalization of US$372m, and reported total annual CEO compensation of US$3.6m for the year to January 2025. We note that's a decrease of 18% compared to last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$594k.

In comparison with other companies in the American Software industry with market capitalizations ranging from US$200m to US$800m, the reported median CEO total compensation was US$4.8m. This suggests that Ooma remunerates its CEO largely in line with the industry average. Moreover, Eric Stang also holds US$20m worth of Ooma stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Speaking on an industry level, nearly 10% of total compensation represents salary, while the remainder of 90% is other remuneration. It's interesting to note that Ooma pays out a greater portion of remuneration through salary, compared to the industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Ooma, Inc.'s Growth Numbers

Ooma, Inc. has reduced its earnings per share by 44% a year over the last three years. Its revenue is up 8.5% over the last year.

Overall this is not a very positive result for shareholders. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Ooma, Inc. Been A Good Investment?

Since shareholders would have lost about 4.8% over three years, some Ooma, Inc. investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

Whatever your view on compensation, you might want to check if insiders are buying or selling Ooma shares (free trial).

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.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.