How Should Investors React To Infinera Corporation’s (NASDAQ:INFN) CEO Pay?

Thomas Fallon has been the CEO of Infinera Corporation (NASDAQ:INFN) since 2010. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. 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.

View our latest analysis for Infinera

How Does Thomas Fallon’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Infinera Corporation has a market cap of US$754m, and is paying total annual CEO compensation of US$4.9m. (This figure is for the year to 2017). While we always look at total compensation first, we note that the salary component is less, at US$630k. When we examined a selection of companies with market caps ranging from US$400m to US$1.6b, we found the median CEO compensation was US$2.2m.

Thus we can conclude that Thomas Fallon receives more in total compensation than the median of a group of companies in the same market, and of similar size to Infinera Corporation. However, this doesn’t necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see, below, how CEO compensation at Infinera has changed over time.

NasdaqGS:INFN CEO Compensation December 3rd 18
NasdaqGS:INFN CEO Compensation December 3rd 18

Is Infinera Corporation Growing?

On average over the last three years, Infinera Corporation has shrunk earnings per share by 96% each year. Its revenue is up 11% over last year.

Sadly for shareholders, earnings per share are actually down, over three years. There’s no doubt that the silver lining is that revenue is up. But it isn’t sufficiently fast growth to overlook the fact that earnings per share has gone backwards over three years. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration.

You might want to check this free visual report on analyst forecasts for future earnings.

Has Infinera Corporation Been A Good Investment?

With a three year total loss of 81%, Infinera Corporation would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary…

We compared the total CEO remuneration paid by Infinera Corporation, and compared it to remuneration at a group of similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

Neither earnings per share nor revenue have been growing sufficiently fast to impress us, over the last three years.

Just as bad, share price gains for investors have failed to materialize, over the same period. In our opinion the CEO might be paid too generously! Shareholders may want to check for free if Infinera insiders are buying or selling shares.

Or you might prefer examine intently this intuitive graph showing past earnings and revenue.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.