Ted Karkus has been the CEO of ProPhase Labs, Inc. (NASDAQ:PRPH) since 2009. First, this article will compare CEO compensation with compensation at similar sized 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. This process should give us an idea about how appropriately the CEO is paid.
How Does Ted Karkus's Compensation Compare With Similar Sized Companies?
Our data indicates that ProPhase Labs, Inc. is worth US$22m, and total CEO compensation is US$1.9m. (This figure is for the year to December 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$210k. We would also highlight that this figure includes the up-front impact of several years of an options package that will vest over 3 years, so is not necessarily reflective of the annual compensation. We took a group of companies with market capitalizations below US$200m, and calculated the median CEO total compensation to be US$474k.
So it might appear that Ted Karkus is being paid more than the average in ProPhase's peer group. However, this does not necessarily mean ProPhase Labs, Inc. is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.
The graphic below shows how CEO compensation at ProPhase Labs has changed from year to year.
Is ProPhase Labs, Inc. Growing?
On average over the last three years, ProPhase Labs, Inc. has shrunk earnings per share by 6.7% each year (measured with a line of best fit). It saw its revenue drop 24% over the last year.
Few shareholders would be pleased to read that earnings per share are lower over three years. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration, but as we noted at least the salary component itself is modest. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has ProPhase Labs, Inc. Been A Good Investment?
Most shareholders would probably be pleased with ProPhase Labs, Inc. for providing a total return of 41% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
We compared the total CEO remuneration paid by ProPhase Labs, Inc., and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.
Earnings per share have not grown in three years, and the revenue growth fails to impress us.
However, we can't argue with the strong returns to shareholders, over the same time period. So on this analysis we'd stop short of criticizing the level of CEO compensation. So you may want to check if insiders are buying ProPhase Labs 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.
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If you spot an error that warrants correction, please contact the editor at email@example.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.