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Should You Worry About Ensurance Limited's (ASX:ENA) CEO Pay?

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Simply Wall St
·4-min read
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Michael Huntly is the CEO of Ensurance Limited (ASX:ENA). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Next, we'll consider growth that the business demonstrates. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

View our latest analysis for Ensurance

How Does Michael Huntly's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Ensurance Limited has a market cap of AU$8.0m, and reported total annual CEO compensation of AU$253k for the year to June 2019. We think total compensation is more important but we note that the CEO salary is lower, at AU$231k. We examined a group of similar sized companies, with market capitalizations of below AU$314m. The median CEO total compensation in that group is AU$392k.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Ensurance stands. On a sector level, around 34% of total compensation represents salary and 66% is other remuneration. It's interesting to note that Ensurance pays out a greater portion of remuneration through salary, in comparison to the wider industry.

At first glance this seems like a real positive for shareholders, since Michael Huntly is paid less than the average total compensation paid by similar sized companies. While this is a good thing, you'll need to understand the business better before you can form an opinion. You can see, below, how CEO compensation at Ensurance has changed over time.

ASX:ENA CEO Compensation April 25th 2020
ASX:ENA CEO Compensation April 25th 2020

Is Ensurance Limited Growing?

Ensurance Limited has seen earnings per share (EPS) move positively by an average of 55% a year, over the last three years (using a line of best fit). In the last year, its revenue is up 178%.

This shows that the company has improved itself over the last few years. Good news for shareholders. The combination of strong revenue growth with medium-term earnings per share improvement certainly points to the kind of growth I like to see. Although we don't have analyst forecasts you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Ensurance Limited Been A Good Investment?

With a three year total loss of 90%, Ensurance Limited would certainly have some dissatisfied shareholders. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

It appears that Ensurance Limited remunerates its CEO below most similar sized companies.

Considering the underlying business is growing earnings, this would suggest the pay is modest. Few would deny that the total shareholder return over the last three years could have been a lot better. We're not critical of the remuneration Michael Huntly receives, but it would be good to see improved returns to shareholders before the remuneration grows too much. When I see fairly low remuneration, combined with earnings per share growth, but without big share price gains, it makes me want to research the potential for future gains. CEO compensation is an important area to keep your eyes on, but we've also identified 6 warning signs for Ensurance (4 are significant!) that you should be aware of before investing here.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.