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Is SDL plc's (LON:SDL) CEO Overpaid Relative To Its Peers?

Simply Wall St

In 2016 Adolfo Hernandez was appointed CEO of SDL plc (LON:SDL). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Next, we'll consider growth that the business demonstrates. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for SDL

How Does Adolfo Hernandez's Compensation Compare With Similar Sized Companies?

According to our data, SDL plc has a market capitalization of UK£545m, and paid its CEO total annual compensation worth UK£1.5m over the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at UK£511k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of UK£310m to UK£1.2b. The median total CEO compensation was UK£875k.

It would therefore appear that SDL plc pays Adolfo Hernandez more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

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

LSE:SDL CEO Compensation, December 24th 2019
LSE:SDL CEO Compensation, December 24th 2019

Is SDL plc Growing?

On average over the last three years, SDL plc has grown earnings per share (EPS) by 56% each year (using a line of best fit). In the last year, its revenue is up 25%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. Shareholders might be interested in this free visualization of analyst forecasts.

Has SDL plc Been A Good Investment?

Most shareholders would probably be pleased with SDL plc for providing a total return of 44% 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...

We examined the amount SDL plc pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

However, the earnings per share growth over three years is certainly impressive. Even better, returns to shareholders have been plentiful, over the same time period. So, considering this good performance, the CEO compensation may be quite appropriate. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling SDL (free visualization of insider trades).

If you want to buy a stock that is better than SDL, this free list of high return, low debt companies is a great place to look.

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.

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. Thank you for reading.