How Should Investors React To Rent.com.au's (ASX:RNT) CEO Pay?

Simply Wall St
·4-min read

This article will reflect on the compensation paid to Greg Bader who has served as CEO of Rent.com.au Limited (ASX:RNT) since 2016. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Rent.com.au.

See our latest analysis for Rent.com.au

Comparing Rent.com.au Limited's CEO Compensation With the industry

At the time of writing, our data shows that Rent.com.au Limited has a market capitalization of AU$16m, and reported total annual CEO compensation of AU$242k for the year to June 2020. That is, the compensation was roughly the same as last year. In particular, the salary of AU$220.0k, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the industry with market capitalizations below AU$283m, we found that the median total CEO compensation was AU$314k. So it looks like Rent.com.au compensates Greg Bader in line with the median for the industry. Furthermore, Greg Bader directly owns AU$751k worth of shares in the company, implying that they are deeply invested in the company's success.

Component

2020

2019

Proportion (2020)

Salary

AU$220k

AU$220k

91%

Other

AU$22k

AU$24k

9%

Total Compensation

AU$242k

AU$244k

100%

Speaking on an industry level, nearly 73% of total compensation represents salary, while the remainder of 27% is other remuneration. It's interesting to note that Rent.com.au pays out a greater portion of remuneration through salary, compared to the industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

ceo-compensation
ceo-compensation

A Look at Rent.com.au Limited's Growth Numbers

Over the past three years, Rent.com.au Limited has seen its earnings per share (EPS) grow by 65% per year. It achieved revenue growth of 13% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Rent.com.au Limited Been A Good Investment?

Given the total shareholder loss of 37% over three years, many shareholders in Rent.com.au Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

As previously discussed, Greg is compensated close to the median for companies of its size, and which belong to the same industry. On the other hand, the company has logged negative shareholder returns over the previous three years. However, EPS growth is positive over the same time frame. Overall, we wouldn't say Greg is paid an unjustified compensation, but shareholders might not favor a raise before shareholder returns show a positive trend.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 5 warning signs for Rent.com.au (of which 1 can't be ignored!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Rent.com.au, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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