Yahoo Finance Shareholders May Not Be So Generous With Energy Resources of Australia Ltd's (ASX:ERA) CEO Compensation And Here's Why
The underwhelming share price performance of Energy Resources of Australia Ltd (ASX:ERA) in the past three years would have disappointed many shareholders. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 28 April 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.
View our latest analysis for Energy Resources of Australia
Comparing Energy Resources of Australia Ltd's CEO Compensation With the industry
At the time of writing, our data shows that Energy Resources of Australia Ltd has a market capitalization of AU$849m, and reported total annual CEO compensation of AU$974k for the year to December 2020. That's just a smallish increase of 3.1% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at AU$393k.
In comparison with other companies in the industry with market capitalizations ranging from AU$517m to AU$2.1b, the reported median CEO total compensation was AU$977k. So it looks like Energy Resources of Australia compensates Paul Arnold in line with the median for the industry.
Component | 2020 | 2019 | Proportion (2020) |
Salary | AU$393k | AU$385k | 40% |
Other | AU$581k | AU$560k | 60% |
Total Compensation | AU$974k | AU$945k | 100% |
On an industry level, roughly 68% of total compensation represents salary and 32% is other remuneration. Energy Resources of Australia pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Energy Resources of Australia Ltd's Growth Numbers
Over the past three years, Energy Resources of Australia Ltd has seen its earnings per share (EPS) grow by 49% per year. It achieved revenue growth of 8.1% 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. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Energy Resources of Australia Ltd Been A Good Investment?
Few Energy Resources of Australia Ltd shareholders would feel satisfied with the return of -43% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
To Conclude...
The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. 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.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 1 warning sign for Energy Resources of Australia that investors should look into moving forward.
Important note: Energy Resources of Australia 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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