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Should You Be Pleased About The CEO Pay At H2O Innovation Inc.'s (CVE:HEO)

Frédéric Dugré has been the CEO of H2O Innovation Inc. (CVE:HEO) since 2008. 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. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for H2O Innovation

How Does Frédéric Dugré's Compensation Compare With Similar Sized Companies?

According to our data, H2O Innovation Inc. has a market capitalization of CA$51m, and paid its CEO total annual compensation worth CA$629k over the year to June 2019. We think total compensation is more important but we note that the CEO salary is lower, at CA$315k. We took a group of companies with market capitalizations below CA$290m, and calculated the median CEO total compensation to be CA$225k.

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Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of H2O Innovation. Talking in terms of the sector, salary represented approximately 75% of total compensation out of all the companies we analysed, while other remuneration made up 25% of the pie. Readers will want to know that H2O Innovation pays a modest slice of remuneration through salary, as compared to the wider sector.

It would therefore appear that H2O Innovation Inc. pays Frédéric Dugré more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration 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 H2O Innovation has changed from year to year.

TSXV:HEO CEO Compensation, March 19th 2020
TSXV:HEO CEO Compensation, March 19th 2020

Is H2O Innovation Inc. Growing?

Over the last three years H2O Innovation Inc. has grown its earnings per share (EPS) by an average of 36% per year (using a line of best fit). Its revenue is up 20% over last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. It could be important to check this free visual depiction of what analysts expect for the future.

Has H2O Innovation Inc. Been A Good Investment?

Given the total loss of 57% over three years, many shareholders in H2O Innovation Inc. are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

We examined the amount H2O Innovation 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, the earnings per share growth over three years is certainly impressive. On the other hand returns to investors over the same period have probably disappointed many. Considering the per share profit growth, but keeping in mind the weak returns, we'd need more time to form a view on CEO compensation. Looking into other areas, we've picked out 3 warning signs for H2O Innovation that investors should think about before committing capital to this stock.

If you want to buy a stock that is better than H2O Innovation, 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 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.