Sumit Kumar has been the CEO of Vecima Networks Inc. (TSE:VCM) since 2013, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether Vecima Networks pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing Vecima Networks Inc.'s CEO Compensation With the industry
Our data indicates that Vecima Networks Inc. has a market capitalization of CA$285m, and total annual CEO compensation was reported as CA$390k for the year to June 2020. That's a notable increase of 18% on last year. Notably, the salary which is CA$283.3k, represents most of the total compensation being paid.
For comparison, other companies in the same industry with market capitalizations ranging between CA$133m and CA$531m had a median total CEO compensation of CA$1.1m. That is to say, Sumit Kumar is paid under the industry median. Moreover, Sumit Kumar also holds CA$1.3m worth of Vecima Networks stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Talking in terms of the industry, salary represented approximately 65% of total compensation out of all the companies we analyzed, while other remuneration made up 35% of the pie. It's interesting to note that Vecima Networks pays out a greater portion of remuneration through salary, compared to the industry. 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 Vecima Networks Inc.'s Growth Numbers
Over the last three years, Vecima Networks Inc. has shrunk its earnings per share by 39% per year. In the last year, its revenue is up 13%.
The decline in EPS is a bit concerning. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that EPS has gone backwards over three years. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Vecima Networks Inc. Been A Good Investment?
We think that the total shareholder return of 37%, over three years, would leave most Vecima Networks Inc. shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
As previously discussed, Sumit is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. And although the company is suffering from declining EPS growth over the past three years, shareholder returns remain strong. So, while it would be nice to have better EPS growth, our analysis suggests CEO compensation is quite modest.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 2 warning signs for Vecima Networks that investors should think about before committing capital to this stock.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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. 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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