Yahoo Finance Why Dana Incorporated’s (NYSE:DAN) CEO Pay Matters To You
Jim Kamsickas took the helm as Dana Incorporated’s (NYSE:DAN) CEO and grew market cap to US$2.89b 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. I will break down Kamsickas’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.
See our latest analysis for Dana
What has DAN’s performance been like?
DAN 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. Over the last year DAN delivered an earnings of US$193.0m , which is a rather significant decline from its prior year’s profit (excluding extraordinary items) of US$686.0m. However, DAN has strived to maintain a good track record of profitability, given its average EPS of US$1.71 over the past couple of years. In the situation of deteriorating profitability, the company may be facing a period of reinvestment and growth, or it can be a sign of some headwind. In any case, CEO compensation should emulate the current condition of the business. From the latest financial statments, Kamsickas’s total compensation grew by 16.0% to US$10.9m. Moreover, Kamsickas’s pay is also made up of 62.58% non-cash elements, which means that fluctuations in DAN’s share price can impact the actual level of what the CEO actually takes home at the end of the day.
Is DAN’s CEO overpaid relative to the market?
Despite the fact that one size does not fit all, since remuneration should account for specific factors of the company and market, we can determine a high-level yardstick to see if DAN deviates substantially from its peers. This outcome helps investors ask the right question about Kamsickas’s incentive alignment. Typically, a US mid-cap has a value of $5B, produces earnings of $290M and pays its CEO circa $5.3M per annum. Considering the size of DAN in terms of market cap, as well as its performance, using earnings as a proxy, it appears that Kamsickas is compensated higher than other US CEOs of profitable mid-caps. Though this is merely a basic calculation, investors should be cognizant of this expense.
What this means for you:
In order to determine whether or not you should invest in DAN, your thesis should be built on fundamentals. Even though CEO pay isn’t technically a key concern, it could serve as an indication as to how board members align incentives and how they think about setting policies. These issues directly impacts how DAN makes money, and factors impacting your return on investment. 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 DAN’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 DAN? 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.
