Kasper Rorsted became the CEO of adidas AG (ETR:ADS) in 2016. This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. 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 Kasper Rorsted's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that adidas AG has a market cap of €52b, and reported total annual CEO compensation of €6.8m for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at €2.0m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. When we examined a group of companies with market caps over €7.2b, we found that their median CEO total compensation was €4.2m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).
As you can see, Kasper Rorsted is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean adidas AG is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see, below, how CEO compensation at adidas has changed over time.
Is adidas AG Growing?
adidas AG has increased its earnings per share (EPS) by an average of 21% a year, over the last three years (using a line of best fit). Its revenue is up 6.0% over last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Shareholders might be interested in this free visualization of analyst forecasts.
Has adidas AG Been A Good Investment?
Most shareholders would probably be pleased with adidas AG for providing a total return of 100% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We compared total CEO remuneration at adidas AG with the amount paid at other large companies. We found that it pays well over the median amount paid in the benchmark group.
However, the earnings per share growth over three years is certainly impressive. On top of that, in the same period, returns to shareholders have been great. As a result of this good performance, the CEO remuneration may well be quite reasonable. Whatever your view on compensation, you might want to check if insiders are buying or selling adidas shares (free trial).
If you want to buy a stock that is better than adidas, this free list of high return, low debt companies is a great place to look.
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