Is Alara Resources Limited's (ASX:AUQ) CEO Overpaid Relative To Its Peers?
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Justin Richard has been the CEO of Alara Resources Limited (ASX:AUQ) since 2015. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. 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.
See our latest analysis for Alara Resources
How Does Justin Richard's Compensation Compare With Similar Sized Companies?
According to our data, Alara Resources Limited has a market capitalization of AU$15m, and pays its CEO total annual compensation worth AU$538k. (This is based on the year to June 2018). While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at AU$282k. We looked at a group of companies with market capitalizations under AU$287m, and the median CEO total compensation was AU$352k.
It would therefore appear that Alara Resources Limited pays Justin Richard more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
The graphic below shows how CEO compensation at Alara Resources has changed from year to year.
Is Alara Resources Limited Growing?
Over the last three years Alara Resources Limited has grown its earnings per share (EPS) by an average of 134% per year (using a line of best fit). Its revenue is down -13% over last year.
This demonstrates that the company has been improving recently. A good result. While it would be good to see revenue growth, profits matter more in the end. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Has Alara Resources Limited Been A Good Investment?
Since shareholders would have lost about 4.0% over three years, some Alara Resources Limited shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn't be too generous with CEO compensation.
In Summary...
We compared total CEO remuneration at Alara Resources Limited with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.
Importantly, though, the company has impressed with its earnings per share growth, over three years. Having said that, shareholders may be disappointed with the weak returns over the last three years. Considering the per share profit growth, but keeping in mind the weak returns, we'd need more time to form a view on CEO compensation. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Alara Resources (free visualization of insider trades).
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.
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. Thank you for reading.
