Yahoo Finance Why Kip McGrath Education Centres' (ASX:KME) CEO Pay Matters
Storm McGrath became the CEO of Kip McGrath Education Centres Limited (ASX:KME) in 2007, 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 assess whether Kip McGrath Education Centres pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
View our latest analysis for Kip McGrath Education Centres
How Does Total Compensation For Storm McGrath Compare With Other Companies In The Industry?
At the time of writing, our data shows that Kip McGrath Education Centres Limited has a market capitalization of AU$78m, and reported total annual CEO compensation of AU$455k for the year to June 2020. That is, the compensation was roughly the same as last year. We note that the salary portion, which stands at AU$383.1k constitutes the majority of total compensation received by the CEO.
In comparison with other companies in the industry with market capitalizations under AU$252m, the reported median total CEO compensation was AU$477k. This suggests that Kip McGrath Education Centres remunerates its CEO largely in line with the industry average. Furthermore, Storm McGrath directly owns AU$4.3m worth of shares in the company, implying that they are deeply invested in the company's success.
Component | 2020 | 2019 | Proportion (2020) |
Salary | AU$383k | AU$361k | 84% |
Other | AU$72k | AU$100k | 16% |
Total Compensation | AU$455k | AU$461k | 100% |
On an industry level, roughly 76% of total compensation represents salary and 24% is other remuneration. Kip McGrath Education Centres pays out 84% of remuneration in the form of a salary, significantly higher than the industry average. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.
Kip McGrath Education Centres Limited's Growth
Kip McGrath Education Centres Limited has reduced its earnings per share by 7.4% a year over the last three years. In the last year, its revenue is down 5.2%.
The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Kip McGrath Education Centres Limited Been A Good Investment?
We think that the total shareholder return of 196%, over three years, would leave most Kip McGrath Education Centres Limited shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
In Summary...
As we touched on above, Kip McGrath Education Centres Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Some investors may take issue with this, especially considering shrinking EPS for the past three years. But on the bright side, shareholder returns have moved northward during the same period. We do not think CEO compensation is a problem, but shareholders will probably want to see an increase in EPS before agreeing the business should pay any more.
CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 5 warning signs for Kip McGrath Education Centres that you should be aware of before investing.
Switching gears from Kip McGrath Education Centres, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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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