We Think Shareholders Are Less Likely To Approve A Large Pay Rise For Key Tronic Corporation's (NASDAQ:KTCC) CEO For Now

In the past three years, the share price of Key Tronic Corporation (NASDAQ:KTCC) has struggled to generate growth for its shareholders. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 28 October 2021. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for Key Tronic

Comparing Key Tronic Corporation's CEO Compensation With the industry

According to our data, Key Tronic Corporation has a market capitalization of US$69m, and paid its CEO total annual compensation worth US$1.6m over the year to July 2021. We note that's an increase of 10% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$685k.

On comparing similar-sized companies in the industry with market capitalizations below US$200m, we found that the median total CEO compensation was US$455k. Accordingly, our analysis reveals that Key Tronic Corporation pays Craig Gates north of the industry median. What's more, Craig Gates holds US$1.4m worth of shares in the company in their own name.

Component	2021	2020	Proportion (2021)
Salary	US$685k	US$651k	42%
Other	US$949k	US$833k	58%
Total Compensation	US$1.6m	US$1.5m	100%

Talking in terms of the industry, salary represented approximately 29% of total compensation out of all the companies we analyzed, while other remuneration made up 71% of the pie. According to our research, Key Tronic has allocated a higher percentage of pay to salary in comparison to the wider industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Key Tronic Corporation's Growth Numbers

Key Tronic Corporation's earnings per share (EPS) grew 69% per year over the last three years. Its revenue is up 15% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's a real positive to see this sort of revenue growth in a single year. That suggests a healthy and growing business. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Key Tronic Corporation Been A Good Investment?

With a three year total loss of 8.0% for the shareholders, Key Tronic Corporation would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 3 warning signs for Key Tronic (2 are concerning!) that you should be aware of before investing here.

Important note: Key Tronic 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.

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.

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