Anil Singhal became the CEO of NetScout Systems, Inc. (NASDAQ:NTCT) in 1984. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Next, we'll consider growth that the business demonstrates. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Anil Singhal's Compensation Compare With Similar Sized Companies?
Our data indicates that NetScout Systems, Inc. is worth US$1.9b, and total annual CEO compensation was reported as US$2.7m for the year to March 2019. We think total compensation is more important but we note that the CEO salary is lower, at US$500k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$1.0b to US$3.2b. The median total CEO compensation was US$4.8m.
Next, let's break down remuneration compositions to understand how the industry and company compare with each other. Speaking on an industry level, we can see that nearly 23% of total compensation represents salary, while the remainder of 77% is other remuneration. NetScout Systems does not set aside a larger portion of remuneration in the form of salary, maintaining the same rate as the wider market.
Most shareholders would consider it a positive that Anil Singhal takes less total compensation than the CEOs of most similar size companies, leaving more for shareholders. Though positive, it's important we delve into the performance of the actual business. The graphic below shows how CEO compensation at NetScout Systems has changed from year to year.
Is NetScout Systems, Inc. Growing?
NetScout Systems, Inc. has reduced its earnings per share by an average of 65% a year, over the last three years (measured with a line of best fit). In the last year, its revenue is down 1.4%.
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. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. It could be important to check this free visual depiction of what analysts expect for the future.
Has NetScout Systems, Inc. Been A Good Investment?
Since shareholders would have lost about 31% over three years, some NetScout Systems, Inc. shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn't be too generous with CEO compensation.
It looks like NetScout Systems, Inc. pays its CEO less than similar sized companies.
Shareholders should note that compensation for Anil Singhal is under the median of a group of similar sized companies. But then, EPS growth is lacking and so are the returns to shareholders. While one could argue it is appropriate for the CEO to be paid less than other CEOs of similar sized companies, given company performance, we would not call the pay overly generous. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling NetScout Systems (free visualization of insider trades).
Important note: NetScout Systems may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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