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Our View On NuEnergy Gas' (ASX:NGY) CEO Pay

Ian Wang became the CEO of NuEnergy Gas Limited (ASX:NGY) in 2014, 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.

Check out our latest analysis for NuEnergy Gas

How Does Total Compensation For Ian Wang Compare With Other Companies In The Industry?

At the time of writing, our data shows that NuEnergy Gas Limited has a market capitalization of AU$18m, and reported total annual CEO compensation of AU$97k for the year to June 2020. We note that's a decrease of 66% compared to last year. In particular, the salary of AU$76.7k, makes up a huge portion of the total compensation being paid to the CEO.

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On comparing similar-sized companies in the industry with market capitalizations below AU$283m, we found that the median total CEO compensation was AU$355k. In other words, NuEnergy Gas pays its CEO lower than the industry median.

Component

2020

2019

Proportion (2020)

Salary

AU$77k

AU$263k

79%

Other

AU$20k

AU$20k

21%

Total Compensation

AU$97k

AU$283k

100%

Talking in terms of the industry, salary represented approximately 76% of total compensation out of all the companies we analyzed, while other remuneration made up 24% of the pie. Although there is a difference in how total compensation is set, NuEnergy Gas more or less reflects the market in terms of setting the salary. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

ceo-compensation
ceo-compensation

A Look at NuEnergy Gas Limited's Growth Numbers

Over the last three years, NuEnergy Gas Limited has not seen its earnings per share change much, though there is a slight positive movement. It has seen most of its revenue evaporate over the past year.

We would argue that the lack of revenue growth in the last year is less than ideal, but the modest EPSgrowth gives us some relief. It's hard to reach a conclusion about business performance right now. This may be one to watch. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has NuEnergy Gas Limited Been A Good Investment?

Since shareholders would have lost about 71% over three years, some NuEnergy Gas Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

As we touched on above, NuEnergy Gas Limited is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But then, EPS growth is lacking and so are the returns to shareholders. We're not critical of the remuneration Ian receives, but it would be good to see improved returns to shareholders before compensation grows too much.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 5 warning signs for NuEnergy Gas (3 make us uncomfortable!) that you should be aware of before investing here.

Important note: NuEnergy 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.