The share price of nVent Electric plc (NYSE:NVT) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. Some of these issues will occupy shareholders' minds as the AGM rolls around on 14 May 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.
Comparing nVent Electric plc's CEO Compensation With the industry
At the time of writing, our data shows that nVent Electric plc has a market capitalization of US$5.3b, and reported total annual CEO compensation of US$6.3m for the year to December 2020. That's a fairly small increase of 5.4% over the previous year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$788k.
In comparison with other companies in the industry with market capitalizations ranging from US$4.0b to US$12b, the reported median CEO total compensation was US$5.9m. This suggests that nVent Electric remunerates its CEO largely in line with the industry average. Moreover, Beth Wozniak also holds US$2.2m worth of nVent Electric stock directly under their own name.
Talking in terms of the industry, salary represented approximately 29% of total compensation out of all the companies we analyzed, while other remuneration made up 71% of the pie. nVent Electric sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
nVent Electric plc's Growth
nVent Electric plc has reduced its earnings per share by 63% a year over the last three years. It saw its revenue drop 7.3% over the last year.
Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has nVent Electric plc Been A Good Investment?
Most shareholders would probably be pleased with nVent Electric plc for providing a total return of 36% over three years. 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.
While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 2 warning signs for nVent Electric that investors should look into moving forward.
Important note: nVent Electric 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.