Stock Analysis

Shareholders May Not Be So Generous With SigmaTron International, Inc.'s (NASDAQ:SGMA) CEO Compensation And Here's Why

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NasdaqCM:SGMA
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In the past three years, the share price of SigmaTron International, Inc. (NASDAQ:SGMA) has struggled to generate growth for its shareholders. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 15 September 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. They could also influence management through voting on resolutions such as executive remuneration. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

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How Does Total Compensation For Gary Fairhead Compare With Other Companies In The Industry?

At the time of writing, our data shows that SigmaTron International, Inc. has a market capitalization of US$27m, and reported total annual CEO compensation of US$337k for the year to April 2021. That is, the compensation was roughly the same as last year. Notably, the salary which is US$305.8k, represents most of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below US$200m, reported a median total CEO compensation of US$444k. So it looks like SigmaTron International compensates Gary Fairhead in line with the median for the industry. Moreover, Gary Fairhead also holds US$554k worth of SigmaTron International stock directly under their own name.

Component20212020Proportion (2021)
Salary US$306k US$300k 91%
Other US$32k US$46k 9%
Total CompensationUS$337k US$346k100%

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. It's interesting to note that SigmaTron International pays out a greater portion of remuneration through salary, compared to the industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

ceo-compensation
NasdaqCM:SGMA CEO Compensation September 9th 2021

SigmaTron International, Inc.'s Growth

Over the past three years, SigmaTron International, Inc. has seen its earnings per share (EPS) grow by 91% per year. It saw its revenue drop 1.2% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. 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 SigmaTron International, Inc. Been A Good Investment?

Given the total shareholder loss of 4.0% over three years, many shareholders in SigmaTron International, Inc. are probably rather dissatisfied, to say the least. 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. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. 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.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 4 warning signs for SigmaTron International (2 are significant!) that you should be aware of before investing here.

Important note: SigmaTron International 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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