What Can We Make Of EROAD's (NZSE:ERD) CEO Compensation?

Simply Wall St
·3-min read

This article will reflect on the compensation paid to Steven Newman who has served as CEO of EROAD Limited (NZSE:ERD) since 2007. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for EROAD

How Does Total Compensation For Steven Newman Compare With Other Companies In The Industry?

Our data indicates that EROAD Limited has a market capitalization of NZ$338m, and total annual CEO compensation was reported as NZ$1.0m for the year to March 2020. That's a notable increase of 39% on last year. We note that the salary portion, which stands at NZ$590.0k constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the same industry with market capitalizations ranging between NZ$151m and NZ$605m had a median total CEO compensation of NZ$791k. This suggests that Steven Newman is paid more than the median for the industry. Moreover, Steven Newman also holds NZ$527k worth of EROAD stock directly under their own name.

Component

2020

2019

Proportion (2020)

Salary

NZ$590k

NZ$567k

57%

Other

NZ$450k

NZ$181k

43%

Total Compensation

NZ$1.0m

NZ$749k

100%

On an industry level, roughly 61% of total compensation represents salary and 39% is other remuneration. There isn't a significant difference between EROAD and the broader market, in terms of salary allocation in the overall compensation package. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

ceo-compensation
ceo-compensation

EROAD Limited's Growth

Over the past three years, EROAD Limited has seen its earnings per share (EPS) grow by 61% per year. It achieved revenue growth of 32% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has EROAD Limited Been A Good Investment?

Most shareholders would probably be pleased with EROAD Limited for providing a total return of 49% 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.

In Summary...

As we noted earlier, EROAD pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Importantly though, EPS growth and shareholder returns are very impressive over the last three years. Considering such exceptional results for the company, we'd venture to say CEO compensation is fair. And given most shareholders are probably very happy with recent returns, they might even think that Steven deserves a raise!

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 4 warning signs for EROAD (1 is significant!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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