Yahoo Finance How Should Investors Feel About Trecora Resources’s (NYSE:TREC) CEO Pay?
Simon Upfill-Brown took the helm as Trecora Resources’s (NYSE:TREC) CEO and grew market cap to US$335.65m recently. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. Today we will assess Upfill-Brown’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability.
View our latest analysis for Trecora Resources
What has TREC’s performance been like?
TREC can create value to shareholders by increasing its profitability, which in turn is reflected into the share price and the investor’s ability to sell their shares at higher capital gains. Most recently, TREC produced an earnings of US$20.26m , which is an increase of 374.29% from its previous year’s earnings of US$4.27m. This is a positive indication that TREC has strived to maintain a good track record of profitability in the face of any headwinds. Since earnings are heading towards the right direction, CEO pay should mirror Upfill-Brown’s value creation for shareholders. During this period Upfill-Brown’s total remuneration rose by 24.82% to US$1.44m. Furthermore, Upfill-Brown’s pay is also made up of 42.55% non-cash elements, which means that fluxes in TREC’s share price can impact the true level of what the CEO actually collects at the end of the year.
What’s a reasonable CEO compensation?
Though no standard benchmark exists, since compensation should be tailored to the specific company and market, we can gauge a high-level benchmark to see if TREC deviates substantially from its peers. This exercise can help shareholders ask the right question about Upfill-Brown’s incentive alignment. Normally, a US small-cap is worth around $1B, creates earnings of $96M, and remunerates its CEO at roughly $2.7M per annum. Allowing for the size of TREC in terms of market cap, as well as its performance, using earnings as a proxy, it appears that Upfill-Brown is paid on a similar level to other US CEOs of small-caps, on average. This could mean Upfill-Brown is paid a suitable level.
Next Steps:
You can breathe easy knowing that shareholder funds aren’t being used to overpay TREC’s CEO. However, on the flipside, you should ask whether Upfill-Brown is appropriately remunerated on the basis of retention. Its important for shareholders to be active in voting governance decisions, as board members are only representatives of investors’ voices. If you have not done so already, I urge you to complete your research by taking a look at the following:
Governance: To find out more about TREC’s governance, look through our infographic report of the company’s board and management.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of TREC? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
