Is Paragon Banking Group PLC's (LON:PAG) CEO Overpaid Relative To Its Peers?

Simply Wall St

Nigel Terrington has been the CEO of Paragon Banking Group PLC (LON:PAG) since 1995. First, this article will compare CEO compensation with compensation at similar sized companies. 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.

See our latest analysis for Paragon Banking Group

How Does Nigel Terrington's Compensation Compare With Similar Sized Companies?

According to our data, Paragon Banking Group PLC has a market capitalization of UK£724m, and paid its CEO total annual compensation worth UK£2.9m over the year to September 2019. We think total compensation is more important but we note that the CEO salary is lower, at UK£503k. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of UK£322m to UK£1.3b. The median total CEO compensation was UK£1.0m.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Paragon Banking Group stands. Talking in terms of the sector, salary represented approximately 37% of total compensation out of all the companies we analysed, while other remuneration made up 63% of the pie. Readers will want to know that Paragon Banking Group pays a modest slice of remuneration through salary, as compared to the wider sector.

Thus we can conclude that Nigel Terrington receives more in total compensation than the median of a group of companies in the same market, and of similar size to Paragon Banking Group PLC. However, this doesn't necessarily mean the pay 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, below, how CEO compensation at Paragon Banking Group has changed over time.

LSE:PAG CEO Compensation April 4th 2020

Is Paragon Banking Group PLC Growing?

Over the last three years Paragon Banking Group PLC has seen earnings per share (EPS) move in a positive direction by an average of 11% per year (using a line of best fit). In the last year, its revenue is up 2.2%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's nice to see a little revenue growth, as this is consistent with healthy business conditions. Shareholders might be interested in this free visualization of analyst forecasts.

Has Paragon Banking Group PLC Been A Good Investment?

Given the total loss of 24% over three years, many shareholders in Paragon Banking Group PLC are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We examined the amount Paragon Banking Group 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. However, the returns to investors are far less impressive, over the same period. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. On another note, we've spotted 1 warning sign for Paragon Banking Group that investors should look into moving forward.

Important note: Paragon Banking Group may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

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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