The underwhelming share price performance of Casa Systems, Inc. (NASDAQ:CASA) in the past three years would have disappointed many shareholders. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 13 May 2021. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.
Comparing Casa Systems, Inc.'s CEO Compensation With the industry
Our data indicates that Casa Systems, Inc. has a market capitalization of US$670m, and total annual CEO compensation was reported as US$6.0m for the year to December 2020. That's a fairly small increase of 5.9% over the previous year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$717k.
On comparing similar companies from the same industry with market caps ranging from US$400m to US$1.6b, we found that the median CEO total compensation was US$3.5m. Hence, we can conclude that Jerry Guo is remunerated higher than the industry median. Furthermore, Jerry Guo directly owns US$88m worth of shares in the company, implying that they are deeply invested in the company's success.
Speaking on an industry level, nearly 22% of total compensation represents salary, while the remainder of 78% is other remuneration. In Casa Systems' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Casa Systems, Inc.'s Growth
Over the past three years, Casa Systems, Inc. has seen its earnings per share (EPS) grow by 8.8% per year. In the last year, its revenue is up 25%.
It's great to see that revenue growth is strong. And in that context, the modest EPS improvement certainly isn't shabby. We wouldn't say this is necessarily top notch growth, but it is certainly promising. 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 Casa Systems, Inc. Been A Good Investment?
Few Casa Systems, Inc. shareholders would feel satisfied with the return of -63% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 4 warning signs (and 2 which are potentially serious) in Casa Systems we think you should know about.
Important note: Casa Systems is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
If you decide to trade Casa Systems, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account.
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. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.