Is De.mem Limited's (ASX:DEM) CEO Salary Justified?
In 2016 Andreas Kroell was appointed CEO of De.mem Limited (ASX:DEM). First, this article will compare CEO compensation with compensation at similar sized 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.
View our latest analysis for De.mem
How Does Andreas Kroell's Compensation Compare With Similar Sized Companies?
Our data indicates that De.mem Limited is worth AU$25m, and total annual CEO compensation was reported as AU$208k for the year to December 2018. It is worth noting that the CEO compensation consists almost entirely of the salary, worth AU$208k. We looked at a group of companies with market capitalizations under AU$327m, and the median CEO total compensation was AU$392k.
Next, let's break down remuneration compositions to understand how the industry and company compare with each other. Speaking on an industry level, we can see that nearly 42% of total compensation represents salary, while the remainder of 58% is other remuneration. According to our research, De.mem has allocated a higher percentage of pay to salary in comparison to the broader sector.
At first glance this seems like a real positive for shareholders, since Andreas Kroell is paid less than the average total compensation paid by similar sized companies. While this is a good thing, you'll need to understand the business better before you can form an opinion. The graphic below shows how CEO compensation at De.mem has changed from year to year.
Is De.mem Limited Growing?
Over the last three years De.mem Limited has seen earnings per share (EPS) move in a positive direction by an average of 117% per year (using a line of best fit). Revenue was pretty flat on last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. It's nice to see a little revenue growth, as this is consistent with healthy business conditions. Although we don't have analyst forecasts you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has De.mem Limited Been A Good Investment?
Given the total loss of 66% over three years, many shareholders in De.mem Limited are probably rather dissatisfied, to say the least. It therefore might be upsetting for shareholders if the CEO were paid generously.
In Summary...
It appears that De.mem Limited remunerates its CEO below most similar sized companies.
Considering the underlying business is growing earnings, this would suggest the pay is modest. Unfortunately, some shareholders may be disappointed with their returns, given the company's performance over the last three years. We're not critical of the remuneration Andreas Kroell receives, but it would be good to see improved returns to shareholders before the remuneration grows too much. When I see fairly low remuneration, combined with earnings per share growth, but without big share price gains, it makes me want to research the potential for future gains. On another note, De.mem has 5 warning signs (and 1 which is potentially serious) we think you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.
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