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Is NEXTDC Limited's (ASX:NXT) CEO Paid Enough Relative To Peers?

Simply Wall St

Craig Scroggie became the CEO of NEXTDC Limited (ASX:NXT) in 2012. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Next, we'll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for NEXTDC

How Does Craig Scroggie's Compensation Compare With Similar Sized Companies?

According to our data, NEXTDC Limited has a market capitalization of AU$2.2b, and pays its CEO total annual compensation worth AU$2.6m. (This is based on the year to June 2018). While we always look at total compensation first, we note that the salary component is less, at AU$1.2m. When we examined a selection of companies with market caps ranging from AU$1.5b to AU$4.7b, we found the median CEO total compensation was AU$2.4m.

So Craig Scroggie is paid around the average of the companies we looked at. While this data point isn't particularly informative alone, it gains more meaning when considered with business performance.

You can see a visual representation of the CEO compensation at NEXTDC, below.

ASX:NXT CEO Compensation, August 14th 2019

Is NEXTDC Limited Growing?

On average over the last three years, NEXTDC Limited has shrunk earnings per share by 1.1% each year (measured with a line of best fit). It achieved revenue growth of 22% over the last year.

The lack of earnings per share growth in the last three years is unimpressive. 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. It could be important to check this free visual depiction of what analysts expect for the future.

Has NEXTDC Limited Been A Good Investment?

Most shareholders would probably be pleased with NEXTDC Limited for providing a total return of 68% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

Craig Scroggie is paid around what is normal the leaders of comparable size companies.

We're not seeing great strides in earnings per share, but the company has clearly pleased some investors, given the returns over the last three years. So we think most shareholders wouldn't be too worried about CEO compensation, which is close to the median for similar sized companies. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling NEXTDC (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.