This article will reflect on the compensation paid to Kevin Pallas who has served as CEO of Engenco Limited (ASX:EGN) since 2015. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Engenco.
Comparing Engenco Limited's CEO Compensation With the industry
According to our data, Engenco Limited has a market capitalization of AU$174m, and paid its CEO total annual compensation worth AU$658k over the year to June 2020. Notably, that's an increase of 28% over the year before. We note that the salary portion, which stands at AU$451.2k constitutes the majority of total compensation received by the CEO.
For comparison, other companies in the industry with market capitalizations below AU$282m, reported a median total CEO compensation of AU$368k. Hence, we can conclude that Kevin Pallas is remunerated higher than the industry median.
On an industry level, around 76% of total compensation represents salary and 24% is other remuneration. Engenco sets aside a smaller share of compensation for salary, in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
A Look at Engenco Limited's Growth Numbers
Engenco Limited has seen its earnings per share (EPS) increase by 16% a year over the past three years. It achieved revenue growth of 3.2% over the last year.
This demonstrates that the company has been improving recently and is good news for the shareholders. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Engenco Limited Been A Good Investment?
Most shareholders would probably be pleased with Engenco Limited for providing a total return of 89% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
As we touched on above, Engenco Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. However, Engenco has produced strong EPS growth and shareholder returns over the last three years. As a result of the excellent all-round performance of the company, we believe CEO compensation is fair. Given the strong history of shareholder returns, the shareholders are probably very happy with Kevin's performance.
CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Engenco that investors should think about before committing capital to this stock.
Switching gears from Engenco, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
This article by Simply Wall St is general in nature. 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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