Is Concho Resources Inc.'s (NYSE:CXO) CEO Salary Justified?
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Tim Leach has been the CEO of Concho Resources Inc. (NYSE:CXO) since 2006. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. 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. The aim of all this is to consider the appropriateness of CEO pay levels.
View our latest analysis for Concho Resources
How Does Tim Leach's Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Concho Resources Inc. has a market cap of US$20b, and is paying total annual CEO compensation of US$13m. (This number is for the twelve months until December 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$1.1m. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
So Tim Leach is paid around the average of the companies we looked at. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance.
You can see, below, how CEO compensation at Concho Resources has changed over time.
Is Concho Resources Inc. Growing?
On average over the last three years, Concho Resources Inc. has grown earnings per share (EPS) by 98% each year (using a line of best fit). Its revenue is up 48% over last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. The combination of strong revenue growth with medium-term earnings per share improvement certainly points to the kind of growth I like to see. Shareholders might be interested in this free visualization of analyst forecasts.
Has Concho Resources Inc. Been A Good Investment?
Given the total loss of 14% over three years, many shareholders in Concho Resources Inc. are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.
In Summary...
Remuneration for Tim Leach is close enough to the median pay for a CEO of a large company .
We like that the company is growing EPS, but it's disappointing to see negative shareholder returns over three years. Considering the the positives we don't think the CEO pays is too high, but it's certainly hard to argue it is too low. So you may want to check if insiders are buying Concho Resources shares with their own money (free access).
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.
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.
