Andy Mah became the CEO of Advantage Oil & Gas Ltd. (TSE:AAV) in 2009, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
How Does Total Compensation For Andy Mah Compare With Other Companies In The Industry?
At the time of writing, our data shows that Advantage Oil & Gas Ltd. has a market capitalization of CA$423m, and reported total annual CEO compensation of CA$2.5m for the year to December 2019. We note that's a decrease of 10% compared to last year. While we always look at total compensation first, our analysis shows that the salary component is less, at CA$420k.
On examining similar-sized companies in the industry with market capitalizations between CA$267m and CA$1.1b, we discovered that the median CEO total compensation of that group was CA$2.0m. This suggests that Advantage Oil & Gas remunerates its CEO largely in line with the industry average. Moreover, Andy Mah also holds CA$3.2m worth of Advantage Oil & Gas stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Talking in terms of the industry, salary represented approximately 45% of total compensation out of all the companies we analyzed, while other remuneration made up 55% of the pie. In Advantage Oil & Gas' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
Advantage Oil & Gas Ltd.'s Growth
Over the last three years, Advantage Oil & Gas Ltd. has shrunk its earnings per share by 137% per year. Its revenue is down 8.9% over the previous year.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has Advantage Oil & Gas Ltd. Been A Good Investment?
Since shareholders would have lost about 69% over three years, some Advantage Oil & Gas Ltd. investors would surely be feeling negative emotions. So shareholders would probably want the company to be lessto generous with CEO compensation.
As we noted earlier, Advantage Oil & Gas pays its CEO in line with similar-sized companies belonging to the same industry. Meanwhile, EPS growth and shareholder returns have been in the red for the last three years. It's tough to call out the compensation as inappropriate, but shareholders might not favor a raise before company performance improves.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 2 warning signs for Advantage Oil & Gas (1 shouldn't be ignored!) that you should be aware of before investing here.
Important note: Advantage Oil & Gas 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.
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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