Stock Analysis

Shareholders Would Not Be Objecting To Harmonic Inc.'s (NASDAQ:HLIT) CEO Compensation And Here's Why

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We have been pretty impressed with the performance at Harmonic Inc. (NASDAQ:HLIT) recently and CEO Patrick Harshman deserves a mention for their role in it. Coming up to the next AGM on 08 June 2021, shareholders would be keeping this in mind. This would also be a chance for them to hear the board review the financial results, discuss future company strategy and vote on any resolutions such as executive remuneration. In light of the great performance, we discuss the case why we think CEO compensation is not excessive.

Check out our latest analysis for Harmonic

How Does Total Compensation For Patrick Harshman Compare With Other Companies In The Industry?

According to our data, Harmonic Inc. has a market capitalization of US$717m, and paid its CEO total annual compensation worth US$3.5m over the year to December 2020. That's a fairly small increase of 3.7% over the previous year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$534k.

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. This suggests that Harmonic remunerates its CEO largely in line with the industry average. What's more, Patrick Harshman holds US$7.8m 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$534k US$530k 15%
Other US$3.0m US$2.8m 85%
Total CompensationUS$3.5m US$3.4m100%

Talking in terms of the industry, salary represented approximately 23% of total compensation out of all the companies we analyzed, while other remuneration made up 77% of the pie. Harmonic sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

NasdaqGS:HLIT CEO Compensation June 2nd 2021

A Look at Harmonic Inc.'s Growth Numbers

Harmonic Inc. has seen its earnings per share (EPS) increase by 44% a year over the past three years. In the last year, its revenue is up 2.9%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. 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 Harmonic Inc. Been A Good Investment?

Most shareholders would probably be pleased with Harmonic Inc. for providing a total return of 67% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Given the improved performance, shareholders may be more forgiving of CEO compensation in the upcoming AGM. Seeing that earnings growth and share price performance seems to be on the right path, the more pressing focus for shareholders at the AGM may be how the board and management plans to turn the company into a sustainably profitable one.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for Harmonic that you should be aware of before investing.

Important note: Harmonic 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.

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