In 2005 Paul Saville was appointed CEO of NVR, Inc. (NYSE:NVR). This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Paul Saville's Compensation Compare With Similar Sized Companies?
Our data indicates that NVR, Inc. is worth US$15b, and total annual CEO compensation was reported as US$39m for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$1.9m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
Thus we can conclude that Paul Saville receives more in total compensation than the median of a group of large companies in the same market as NVR, Inc.. 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.
The graphic below shows how CEO compensation at NVR has changed from year to year.
Is NVR, Inc. Growing?
On average over the last three years, NVR, Inc. has grown earnings per share (EPS) by 28% each year (using a line of best fit). In the last year, its revenue is up 6.0%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. It could be important to check this free visual depiction of what analysts expect for the future.
Has NVR, Inc. Been A Good Investment?
Most shareholders would probably be pleased with NVR, Inc. for providing a total return of 117% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
We compared total CEO remuneration at NVR, Inc. with the amount paid at other large companies. Our data suggests that it pays above the median CEO pay within that group.
However we must not forget that the EPS growth has been very strong over three years. On top of that, in the same period, returns to shareholders have been great. So, considering this good performance, the CEO compensation may be quite appropriate. So you may want to check if insiders are buying NVR shares with their own money (free access).
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.
If you spot an error that warrants correction, please contact the editor at email@example.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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