Peter Schwann has been the CEO of Aruma Resources Limited (ASX:AAJ) since 2010, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing Aruma Resources Limited's CEO Compensation With the industry
At the time of writing, our data shows that Aruma Resources Limited has a market capitalization of AU$11m, and reported total annual CEO compensation of AU$105k for the year to June 2020. Notably, that's a decrease of 52% over the year before. In particular, the salary of AU$95.8k, makes up a huge portion of the total compensation being paid to the CEO.
For comparison, other companies in the industry with market capitalizations below AU$279m, reported a median total CEO compensation of AU$303k. Accordingly, Aruma Resources pays its CEO under the industry median. Moreover, Peter Schwann also holds AU$279k worth of Aruma Resources stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
On an industry level, roughly 69% of total compensation represents salary and 31% is other remuneration. Aruma Resources is paying a higher share of its remuneration through a salary in comparison to the overall industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.
A Look at Aruma Resources Limited's Growth Numbers
Aruma Resources Limited's earnings per share (EPS) grew 29% per year over the last three years. It achieved revenue growth of 22% over the last year.
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. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Aruma Resources Limited Been A Good Investment?
With a total shareholder return of 11% over three years, Aruma Resources Limited shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
As we touched on above, Aruma Resources Limited is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But over the last three years, EPS growth has been growing rapidly, which is a great sign for the company. Unfortunately, although shareholder returns are growing, they haven't impressed us as much in comparison, over the same period. We would wish for better returns (whether dividends or capital gains) but we do admire the solidEPS growth on show here. So it's fair to say Peter has done quite well despite modest compensation and shareholders might not be averse to a raise.
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 5 warning signs for Aruma Resources (4 shouldn't be ignored!) that you should be aware of before investing here.
Switching gears from Aruma Resources, 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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