Shareholders May Not Be So Generous With Primeserv Group Limited's (JSE:PMV) CEO Compensation And Here's Why

Primeserv Group Limited (JSE:PMV) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 25 November 2022. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

Our analysis indicates that PMV is potentially undervalued!

Comparing Primeserv Group Limited's CEO Compensation With The Industry

According to our data, Primeserv Group Limited has a market capitalization of R83m, and paid its CEO total annual compensation worth R6.9m over the year to March 2022. Notably, that's an increase of 28% over the year before. We note that the salary portion, which stands at R4.36m constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the industry with market capitalizations under R3.4b, the reported median total CEO compensation was R5.1m. Accordingly, our analysis reveals that Primeserv Group Limited pays Merrick Abel north of the industry median. What's more, Merrick Abel holds R22m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

On an industry level, around 43% of total compensation represents salary and 57% is other remuneration. Primeserv Group pays out 63% of remuneration in the form of a salary, significantly higher than the industry average. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Primeserv Group Limited's Growth

Over the last three years, Primeserv Group Limited has shrunk its earnings per share by 9.6% per year. In the last year, its revenue is up 5.4%.

The decline in EPS is a bit concerning. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Primeserv Group Limited Been A Good Investment?

Most shareholders would probably be pleased with Primeserv Group Limited for providing a total return of 67% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 4 warning signs for Primeserv Group (of which 2 are significant!) that you should know about in order to have a holistic understanding of the stock.

Important note: Primeserv Group 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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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.