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John Gowing has been the CEO of Gowing Bros. Limited (ASX:GOW) since 1987, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Gowing Bros.
Comparing Gowing Bros. Limited's CEO Compensation With the industry
At the time of writing, our data shows that Gowing Bros. Limited has a market capitalization of AU$108m, and reported total annual CEO compensation of AU$307k for the year to July 2020. That's mostly flat as compared to the prior year's compensation. In particular, the salary of AU$243.4k, 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$259m, reported a median total CEO compensation of AU$631k. Accordingly, Gowing Bros pays its CEO under the industry median. What's more, John Gowing holds AU$42m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, roughly 61% of total compensation represents salary and 39% is other remuneration. It's interesting to note that Gowing Bros pays out a greater portion of remuneration through salary, compared to the industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
A Look at Gowing Bros. Limited's Growth Numbers
Over the last three years, Gowing Bros. Limited has shrunk its earnings per share by 41% per year. Revenue was pretty flat on last year.
The decline in EPS is a bit concerning. And the flat revenue is seriously uninspiring. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Gowing Bros. Limited Been A Good Investment?
With a three year total loss of 28% for the shareholders, Gowing Bros. Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.
As we touched on above, Gowing Bros. Limited is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. While we are quite underwhelmed with EPS growth, the shareholder returns over the past three years have also failed to impress us. It's tough to say that John is earning a very high compensation, but shareholders will likely want to see healthier investor returns before agreeing that a raise is in order.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 6 warning signs for Gowing Bros (of which 2 make us uncomfortable!) that you should know about in order to have a holistic understanding of the stock.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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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