Does Cintas' (NASDAQ:CTAS) CEO Salary Compare Well With The Performance Of The Company?
Scott Farmer has been the CEO of Cintas Corporation (NASDAQ:CTAS) since 2003, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether Cintas pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Check out our latest analysis for Cintas
How Does Total Compensation For Scott Farmer Compare With Other Companies In The Industry?
At the time of writing, our data shows that Cintas Corporation has a market capitalization of US$35b, and reported total annual CEO compensation of US$6.7m for the year to May 2020. We note that's a decrease of 22% compared to last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.3m.
For comparison, other companies in the industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$5.7m. So it looks like Cintas compensates Scott Farmer in line with the median for the industry. Moreover, Scott Farmer also holds US$5.1b worth of Cintas stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Component | 2020 | 2019 | Proportion (2020) |
Salary | US$1.3m | US$1.2m | 19% |
Other | US$5.4m | US$7.4m | 81% |
Total Compensation | US$6.7m | US$8.6m | 100% |
Speaking on an industry level, nearly 23% of total compensation represents salary, while the remainder of 77% is other remuneration. Cintas sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Cintas Corporation's Growth
Cintas Corporation has seen its earnings per share (EPS) increase by 25% a year over the past three years. Revenue was pretty flat on last year.
This demonstrates that the company has been improving recently and is good news for the shareholders. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Cintas Corporation Been A Good Investment?
Boasting a total shareholder return of 127% over three years, Cintas Corporation has done well by shareholders. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
To Conclude...
As we touched on above, Cintas Corporation is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Investors would surely be happy to see that returns have been great, and that EPS is up. Indeed, many might consider that Scott is compensated rather modestly, given the solid company performance! Also, such solid returns might lead to shareholders warming to the idea of a bump in pay.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 2 warning signs for Cintas that you should be aware of before investing.
Switching gears from Cintas, 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.