In 2015 George Kurian was appointed CEO of NetApp, Inc. (NASDAQ:NTAP). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does George Kurian's Compensation Compare With Similar Sized Companies?
Our data indicates that NetApp, Inc. is worth US$9.3b, and total annual CEO compensation was reported as US$13m for the year to April 2019. We think total compensation is more important but we note that the CEO salary is lower, at US$925k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We looked at a group of companies with market capitalizations from US$4.0b to US$12b, and the median CEO total compensation was US$7.6m.
Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where NetApp stands. Talking in terms of the sector, salary represented approximately 27% of total compensation out of all the companies we analysed, while other remuneration made up 73% of the pie. Non-salary compensation represents a greater slice of the remuneration pie for NetApp, in sharp contrast to the overall sector.
As you can see, George Kurian is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean NetApp, Inc. is paying too much. 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 NetApp has changed from year to year.
Is NetApp, Inc. Growing?
Over the last three years NetApp, Inc. has seen earnings per share (EPS) move in a positive direction by an average of 50% per year (using a line of best fit). Its revenue is down 9.6% over last year.
This demonstrates that the company has been improving recently. A good result. Revenue growth is a real positive for growth, but ultimately profits are more important. You might want to check this free visual report on analyst forecasts for future earnings.
Has NetApp, Inc. Been A Good Investment?
NetApp, Inc. has generated a total shareholder return of 14% over three years, so most shareholders would be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.
We examined the amount NetApp, Inc. pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.
However we must not forget that the EPS growth has been very strong over three years. We also note that, over the same time frame, shareholder returns haven't been bad. So, considering the EPS growth we do not wish to criticize the level of CEO compensation, though we'd recommend further research on management. CEO compensation is an important area to keep your eyes on, but we've also identified 4 warning signs for NetApp (1 is potentially serious!) that you should be aware of before investing here.
If you want to buy a stock that is better than NetApp, this free list of high return, low debt companies is a great place to look.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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