Yahoo Finance Does The Alumasc Group plc’s (LON:ALU) CEO Salary Reflect Performance?
Leading The Alumasc Group plc (LSE:ALU) as the CEO, G. Hooper took the company to a valuation of UK£49.39M. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor. I will break down Hooper’s pay and compare this to the company’s performance over the same period, as well as measure it against other UK CEOs leading companies of similar size and profitability. See our latest analysis for Alumasc Group
What has ALU’s performance been like?
Profitability of a company is a strong indication of ALU’s ability to generate returns on shareholders’ funds through corporate activities. In this exercise, I will use profits as a proxy for Hooper’s performance. In the past year, ALU delivered a profit of UK£6.09M , which is an increase of 10.73% from its previous year’s earnings of UK£5.50M. This is an encouraging signal that ALU aims to sustain a strong track record of generating profits regardless of the challenges. Given earnings are moving the right way, CEO pay should mirror Hooper’s hard work. During the same period, Hooper’s total compensation rose by 17.44% to UK£579.00K. Although I couldn’t find information on the composition of Hooper’s pay, if some portion were non-cash items such as stocks and options, then fluctuations in ALU’s share price can affect the actual level of what the CEO actually collects at the end of the year.
Is ALU’s CEO overpaid relative to the market?
Though there is no cookie-cutter approach, as remuneration should account for specific factors of the company and market, we can evaluate a high-level thresold to see if ALU deviates substantially from its peers. This exercise can help direct shareholders to ask the right question about Hooper’s incentive alignment. Normally, a UK small-cap has a value of £696M, produces earnings of £67M, and remunerates its CEO at roughly £1M annually. Considering ALU’s size and performance, in terms of market cap and earnings, it seems that Hooper is compensated similar to the average UK small-cap CEO This could mean Hooper is paid a suitable level.
Next Steps:
In order to determine whether or not you should invest in ALU, your thesis should be built on fundamentals. Even though CEO pay isn’t technically a key concern, it could serve as an indication as to how board members align incentives and how they think about setting policies. These issues directly impacts how ALU makes money, and factors impacting your return on investment. If you have not done so already, I urge you to complete your research by taking a look at the following:
Governance: To find out more about ALU’s governance, look through our infographic report of the company’s board and management.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ALU? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
