In the past three years, shareholders of Pro-Pac Packaging Limited (ASX:PPG) have seen a loss on their investment. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 23 November 2021. They could also influence management through voting on resolutions such as executive remuneration. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.
Comparing Pro-Pac Packaging Limited's CEO Compensation With the industry
According to our data, Pro-Pac Packaging Limited has a market capitalization of AU$158m, and paid its CEO total annual compensation worth AU$1.3m over the year to June 2021. Notably, that's an increase of 21% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$577k.
On comparing similar-sized companies in the industry with market capitalizations below AU$272m, we found that the median total CEO compensation was AU$107k. Hence, we can conclude that Tim Welsh is remunerated higher than the industry median.
Talking in terms of the industry, salary represented approximately 62% of total compensation out of all the companies we analyzed, while other remuneration made up 38% of the pie. Pro-Pac Packaging sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
Pro-Pac Packaging Limited's Growth
Pro-Pac Packaging Limited has seen its earnings per share (EPS) increase by 91% a year over the past three years. In the last year, its revenue is down 8.0%.
This demonstrates that the company has been improving recently and is good news for the shareholders. It's always a tough situation when revenues are not growing, but ultimately profits are more important. 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 Pro-Pac Packaging Limited Been A Good Investment?
Given the total shareholder loss of 11% over three years, many shareholders in Pro-Pac Packaging Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.
Shareholders have not seen their shares grow in value, rather they have seen their shares decline. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. Shareholders would be keen to know what's holding the stock back when earnings have grown. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.
CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 3 warning signs (and 1 which is a bit unpleasant) in Pro-Pac Packaging we think you should know about.
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.
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.
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