What has been the trend in I’s earnings?I can create value to shareholders by increasing its profitability, which in turn is reflected into the share price and the investor’s ability to sell their shares at higher capital gains. Most recently, I produced negative earnings of -US$210.96m , compared to the previous year’s positive earnings. But on average, I has been loss-making in the past, with a 5-year average EPS of -US$5.55. 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 event, CEO compensation should represent the current condition of the business. In the latest report, Spengler’s total remuneration increased by 12.48% to US$766.01k.
Is I’s CEO overpaid relative to the market?
Despite the fact that no standard benchmark exists, since compensation should account for specific factors of the company and market, we can gauge a high-level thresold to see if I deviates substantially from its peers. This exercise helps investors ask the right question about Spengler’s incentive alignment. Normally, a US mid-cap is worth around $5B, creates earnings of $290M and remunerates its CEO circa $5.3M per annum. Normally I would look at market cap and earnings as a proxy for performance, however, I’s negative earnings lower the effectiveness of this method. Looking at the range of compensation for mid-cap executives, it seems like Spengler is paid aptly compared to those in similar-sized companies. Putting everything together, although I is unprofitable, it seems like the CEO’s pay is sound.
CEO pay is one of those topics of high controversy. Nonetheless, it should be talked about with full transparency from the board to shareholders. Is Spengler remunerated appropriately based on other factors we have not covered today? Is this justified? As a shareholder, you should be aware of how those that represent you (i.e. the board of directors) make decisions on CEO pay and whether their incentives are aligned with yours. 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 I’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 I? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!