Yahoo Finance How Much Did CBAK Energy Technology Inc’s (NASDAQ:CBAK) CEO Pocket Last Year?
Leading CBAK Energy Technology Inc (NASDAQ:CBAK) as the CEO, Yunfei Li took the company to a valuation of US$34.10M. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. Today we will assess Li’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability. View our latest analysis for CBAK Energy Technology
What has CBAK’s performance been like?
CBAK can create value to shareholders by increasing its profitability, which in turn is reflected into the share price and the investor’s ability to sell their shares at higher capital gains. Most recently, CBAK delivered negative earnings of -US$21.97M , which is a further decline from prior year’s loss of -US$12.88M. Moreover, on average, CBAK has been loss-making in the past, with a 5-year average EPS of -US$2.67. During times of unprofitability the company may be going through a period of reinvestment and growth, or it can be an indication of some headwind. In any case, CEO compensation should represent the current state of the business. In the latest financial statments, Li’s total remuneration increased over two-fold, reaching US$116.34K , though off a low base.
What’s a reasonable CEO compensation?
Even though no standard benchmark exists, since remuneration should account for specific factors of the company and market, we can gauge a high-level yardstick to see if CBAK deviates substantially from its peers. This exercise helps investors ask the right question about Li’s incentive alignment. Typically, a US small-cap has a value of $1B, produces earnings of $96M, and remunerates its CEO at roughly $2.7M per year. Normally I would look at market cap and earnings as a proxy for performance, however, CBAK’s negative earnings reduces the effectiveness of this method. Looking at the range of compensation for small-cap executives, it seems like Li is being paid within the bounds of reasonableness. Putting everything together, though CBAK is loss-making, it seems like the CEO’s pay is reflective of the appropriate level.
Next Steps:
My conclusion is that Li is not being overpaid. But your role as a shareholder should not end here. As above, this is a relatively simplistic calculation using high-level benchmarket. Proactive shareholders should question their representatives (i.e. the board of directors) how they think about the CEO’s incentive alignment with shareholders and how they balance this with retention and reward. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
Governance: To find out more about CBAK’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 CBAK? 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.
