Francois Locoh-Donou has been the CEO of F5 Networks, Inc. (NASDAQ:FFIV) since 2017, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether F5 Networks pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing F5 Networks, Inc.'s CEO Compensation With the industry
According to our data, F5 Networks, Inc. has a market capitalization of US$12b, and paid its CEO total annual compensation worth US$11m over the year to September 2020. Notably, that's an increase of 15% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$875k.
On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$1.4m. Hence, we can conclude that Francois Locoh-Donou is remunerated higher than the industry median. Furthermore, Francois Locoh-Donou directly owns US$14m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, around 27% of total compensation represents salary and 73% is other remuneration. It's interesting to note that F5 Networks allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
F5 Networks, Inc.'s Growth
F5 Networks, Inc. has reduced its earnings per share by 9.5% a year over the last three years. It achieved revenue growth of 6.1% over the last year.
The decline in EPS is a bit concerning. 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. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has F5 Networks, Inc. Been A Good Investment?
F5 Networks, Inc. has served shareholders reasonably well, with a total return of 28% over three years. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
As we touched on above, F5 Networks, Inc. is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Meanwhile, EPS has not been growing sufficiently to impress us, over the last three years. And shareholder returns are decent but not great. So you can understand why we do not think CEO compensation is particularly modest!
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 1 warning sign for F5 Networks that investors should be aware of in a dynamic business environment.
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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