Matthew Allen has been the CEO of Otto Energy Limited (ASX:OEL) since 2014. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we'll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Matthew Allen's Compensation Compare With Similar Sized Companies?
According to our data, Otto Energy Limited has a market capitalization of AU$84m, and paid its CEO total annual compensation worth US$695k over the year to June 2019. We note that's an increase of 63% above last year. We think total compensation is more important but we note that the CEO salary is lower, at US$360k. We took a group of companies with market capitalizations below US$200m, and calculated the median CEO total compensation to be US$255k.
Thus we can conclude that Matthew Allen receives more in total compensation than the median of a group of companies in the same market, and of similar size to Otto Energy Limited. However, this doesn't necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.
The graphic below shows how CEO compensation at Otto Energy has changed from year to year.
Is Otto Energy Limited Growing?
On average over the last three years, Otto Energy Limited has grown earnings per share (EPS) by 44% each year (using a line of best fit). It achieved revenue growth of 227% over the last year.
This demonstrates that the company has been improving recently. A good result. The combination of strong revenue growth with medium-term earnings per share improvement certainly points to the kind of growth I like to see. You might want to check this free visual report on analyst forecasts for future earnings.
Has Otto Energy Limited Been A Good Investment?
Given the total loss of 1.6% over three years, many shareholders in Otto Energy Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.
We examined the amount Otto Energy Limited pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.
However, the earnings per share growth over three years is certainly impressive. However, the returns to investors are far less impressive, over the same period. So shareholders might not feel great about the fact that CEO pay increased on last year. While EPS is positive, we'd say shareholders would want better returns before the CEO is paid much more. So you may want to check if insiders are buying Otto Energy shares with their own money (free access).
If you want to buy a stock that is better than Otto Energy, this free list of high return, low debt companies is a great place to look.
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