The performance at Smith-Midland Corporation (NASDAQ:SMID) has been quite strong recently and CEO Ashley Smith has played a role in it. Shareholders will have this at the front of their minds in the upcoming AGM on 23 June 2021. It is likely that the focus will be on company strategy going forward as shareholders hear from the board and cast their votes on resolutions such as executive remuneration and other matters. Here is our take on why we think CEO compensation is not extravagant.
Comparing Smith-Midland Corporation's CEO Compensation With the industry
According to our data, Smith-Midland Corporation has a market capitalization of US$109m, and paid its CEO total annual compensation worth US$537k over the year to December 2020. We note that's an increase of 26% above last year. Notably, the salary which is US$313.7k, represents a considerable chunk of the total compensation being paid.
In comparison with other companies in the industry with market capitalizations under US$200m, the reported median total CEO compensation was US$422k. This suggests that Smith-Midland remunerates its CEO largely in line with the industry average. Moreover, Ashley Smith also holds US$4.0m worth of Smith-Midland stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Talking in terms of the industry, salary represented approximately 15% of total compensation out of all the companies we analyzed, while other remuneration made up 85% of the pie. Smith-Midland is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
Smith-Midland Corporation's Growth
Over the past three years, Smith-Midland Corporation has seen its earnings per share (EPS) grow by 57% per year. In the last year, its revenue is up 6.3%.
This demonstrates that the company has been improving recently and is good news for the shareholders. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. 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 Smith-Midland Corporation Been A Good Investment?
Boasting a total shareholder return of 150% over three years, Smith-Midland Corporation has done well by shareholders. 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.
Seeing that the company has put in a relatively good performance, the CEO remuneration policy may not be the focus at the AGM. In fact, strategic decisions that could impact the future of the business might be a far more interesting topic for investors as it would help them set their longer-term expectations.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 1 warning sign for Smith-Midland that investors should think about before committing capital to this stock.
Important note: Smith-Midland 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.
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