Tony Wood became the CEO of Meggitt PLC (LON:MGGT) in 2018, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Meggitt.
Comparing Meggitt PLC's CEO Compensation With the industry
Our data indicates that Meggitt PLC has a market capitalization of UK£2.4b, and total annual CEO compensation was reported as UK£2.5m for the year to December 2019. That's a fairly small increase of 6.7% over the previous year. While we always look at total compensation first, our analysis shows that the salary component is less, at UK£660k.
For comparison, other companies in the same industry with market capitalizations ranging between UK£1.5b and UK£4.9b had a median total CEO compensation of UK£4.2m. Accordingly, Meggitt pays its CEO under the industry median. What's more, Tony Wood holds UK£132k worth of shares in the company in their own name.
Talking in terms of the industry, salary represented approximately 42% of total compensation out of all the companies we analyzed, while other remuneration made up 58% of the pie. In Meggitt's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
A Look at Meggitt PLC's Growth Numbers
Meggitt PLC has reduced its earnings per share by 53% a year over the last three years. In the last year, its revenue is down 3.5%.
The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Meggitt PLC Been A Good Investment?
Since shareholders would have lost about 37% over three years, some Meggitt PLC investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
As previously discussed, Tony is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. Over the last three years, shareholder returns have been downright disappointing, and EPSgrowth has been equally disappointing. Although we wouldn’t say CEO compensation is high, it’s tough to foresee shareholders warming up to thoughts of a bump anytime soon.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 1 warning sign for Meggitt that investors should look into moving forward.
Important note: Meggitt is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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