Canada markets closed

Is HEXO Corp. (TSE:HEXO) Overpaying Its CEO?

Simply Wall St

Sébastien St-Louis became the CEO of HEXO Corp. (TSE:HEXO) in 2013. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we'll look at a snap shot of the business growth. 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.

Check out our latest analysis for HEXO

How Does Sébastien St-Louis's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that HEXO Corp. has a market cap of CA$278m, and reported total annual CEO compensation of CA$8.8m for the year to July 2019. While we always look at total compensation first, we note that the salary component is less, at CA$486k. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We looked at a group of companies with market capitalizations from CA$140m to CA$559m, and the median CEO total compensation was CA$1.1m.

Thus we can conclude that Sébastien St-Louis receives more in total compensation than the median of a group of companies in the same market, and of similar size to HEXO Corp.. However, this doesn't necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

The graphic below shows how CEO compensation at HEXO has changed from year to year.

TSX:HEXO CEO Compensation, March 17th 2020

Is HEXO Corp. Growing?

On average over the last three years, HEXO Corp. has shrunk earnings per share by 33% each year (measured with a line of best fit). In the last year, its revenue is up 494%.

Investors should note that, over three years, earnings per share are down. But in contrast the revenue growth is strong, suggesting future potential for earnings growth. It's hard to reach a conclusion about business performance right now. This may be one to watch. It could be important to check this free visual depiction of what analysts expect for the future.

Has HEXO Corp. Been A Good Investment?

Given the total loss of 37% over three years, many shareholders in HEXO Corp. 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 HEXO Corp. pays its CEO, and compared it to the amount paid by similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

While we have not been overly impressed by the business performance, the shareholder returns, over three years, have been disappointing. Although we'd stop short of calling it inappropriate, we think the CEO compensation is probably more on the generous side of things. Taking a breather from CEO compensation, we've spotted 4 warning signs for HEXO (of which 1 is concerning!) you should know about in order to have a holistic understanding of the stock.

Important note: HEXO 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.