Is Sotherly Hotels Inc.'s (NASDAQ:SOHO) CEO Salary Justified?
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In 2004 Drew Sims was appointed CEO of Sotherly Hotels Inc. (NASDAQ:SOHO). First, this article will compare CEO compensation with compensation at similar sized companies. Next, we'll consider growth that the business demonstrates. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.
See our latest analysis for Sotherly Hotels
How Does Drew Sims's Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Sotherly Hotels Inc. has a market cap of US$111m, and is paying total annual CEO compensation of US$835k. (This figure is for the year to December 2018). That's a modest increase of 2.1% on the prior year year. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$588k. We examined a group of similar sized companies, with market capitalizations of below US$200m. The median CEO total compensation in that group is US$453k.
It would therefore appear that Sotherly Hotels Inc. pays Drew Sims more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.
You can see, below, how CEO compensation at Sotherly Hotels has changed over time.
Is Sotherly Hotels Inc. Growing?
Over the last three years Sotherly Hotels Inc. has shrunk its earnings per share by an average of 118% per year (measured with a line of best fit). Its revenue is up 17% over last year.
Sadly for shareholders, earnings per share are actually down, over three years. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for me to put aside my concerns around earnings. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.
Has Sotherly Hotels Inc. Been A Good Investment?
Boasting a total shareholder return of 68% over three years, Sotherly Hotels Inc. 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.
In Summary...
We compared total CEO remuneration at Sotherly Hotels Inc. with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.
Neither earnings per share nor revenue have been growing sufficiently fast to impress us, over the last three years.
However, we can't argue with the strong returns to shareholders, over the same time period. Considering this, shareholders are probably not too worried about the CEO compensation. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Sotherly Hotels (free visualization of insider trades).
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.
