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The underwhelming share price performance of Jackpot Digital Inc. (CVE:JJ) in the past three years would have disappointed many shareholders. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 16 September 2021. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.
Comparing Jackpot Digital Inc.'s CEO Compensation With the industry
At the time of writing, our data shows that Jackpot Digital Inc. has a market capitalization of CA$17m, and reported total annual CEO compensation of CA$409k for the year to December 2020. We note that's an increase of 79% above last year. In particular, the salary of CA$396.0k, makes up a huge portion of the total compensation being paid to the CEO.
In comparison with other companies in the industry with market capitalizations under CA$253m, the reported median total CEO compensation was CA$288k. Hence, we can conclude that Jake Kalpakian is remunerated higher than the industry median.
On an industry level, around 86% of total compensation represents salary and 14% is other remuneration. Investors will find it interesting that Jackpot Digital pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
A Look at Jackpot Digital Inc.'s Growth Numbers
Jackpot Digital Inc. has seen its earnings per share (EPS) increase by 90% a year over the past three years. In the last year, its revenue is down 81%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Jackpot Digital Inc. Been A Good Investment?
With a total shareholder return of -90% over three years, Jackpot Digital Inc. shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
Jake receives almost all of their compensation through a salary. The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.
CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 6 warning signs for Jackpot Digital (of which 4 are significant!) that you should know about in order to have a holistic understanding of the stock.
Important note: Jackpot Digital is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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