Marvin Ellison became the CEO of Lowe's Companies, Inc. (NYSE:LOW) in 2018, 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 look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Lowe's Companies.
Comparing Lowe's Companies, Inc.'s CEO Compensation With the industry
At the time of writing, our data shows that Lowe's Companies, Inc. has a market capitalization of US$126b, and reported total annual CEO compensation of US$12m for the year to January 2020. That's a notable decrease of 19% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.5m.
For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$7.7m. Accordingly, our analysis reveals that Lowe's Companies, Inc. pays Marvin Ellison north of the industry median. What's more, Marvin Ellison holds US$20m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Talking in terms of the industry, salary represented approximately 19% of total compensation out of all the companies we analyzed, while other remuneration made up 81% of the pie. In Lowe's Companies' 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.
A Look at Lowe's Companies, Inc.'s Growth Numbers
Lowe's Companies, Inc.'s earnings per share (EPS) grew 19% per year over the last three years. Its revenue is up 19% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Lowe's Companies, Inc. Been A Good Investment?
Boasting a total shareholder return of 70% over three years, Lowe's Companies, Inc. has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
As we noted earlier, Lowe's Companies pays its CEO higher than the norm for similar-sized companies belonging to the same industry. But EPS growth and shareholder returns have been top-notch for the past three years. So, in acknowledgment of the overall excellent performance, we believe CEO compensation is appropriate. The pleasing shareholder returns are the cherry on top. We wouldn't be wrong in saying that shareholders feel that Marvin's performance creates value for the company.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 1 warning sign for Lowe's Companies that you should be aware of before investing.
Important note: Lowe's Companies 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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