What has been the trend in GNCM.A’s earnings?Profitability of a company is a strong indication of GNCM.A’s ability to generate returns on shareholders’ funds through corporate activities. In this exercise, I will use profits as a proxy for Duncan’s performance. Most recently, GNCM.A produced negative earnings of -US$88.28M , compared to the previous year’s positive earnings. But on average, GNCM.A has been loss-making in the past, with a 5-year average EPS of -US$0.20. In the situation of negative earnings, the company may be facing a period of reinvestment and growth, or it can be a signal of some headwind. In any case, CEO compensation should mirror the current condition of the business. In the latest financial statments, Duncan’s total remuneration dropped by -12.26%, to US$2.96M. Furthermore, Duncan’s pay is also made up of 41.23% non-cash elements, which means that fluctuations in GNCM.A’s share price can move the true level of what the CEO actually receives.
Is GNCM.A’s CEO overpaid relative to the market?
Though one size does not fit all, since compensation should be tailored to the specific company and market, we can fashion a high-level yardstick to see if GNCM.A deviates substantially from its peers. This exercise can help shareholders ask the right question about Duncan’s incentive alignment. Normally, a US small-cap has a value of $1B, generates earnings of $96M, and remunerates its CEO circa $2.7M per year. Normally I would use earnings and market cap to account for variations in performance, however, GNCM.A’s negative earnings reduces the effectiveness of this method. Given the range of pay for small-cap executives, it seems like Duncan’s pay outstrips those in comparable companies.
What this means for you:
Whether Duncan is over or underpaid should not be a deciding factor whether or not you invest in GNCM.A. However, the way the company is governed and policies, such as remuneration, are structured, are important considerations for an investor. The best place to start is to understand how well GNCM.A is placed financially. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
- Governance: To find out more about GNCM.A’s governance, look through our infographic report of the company’s board and management.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GNCM.A? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!