Leading Premier Inc (NASDAQ:PINC) as the CEO, Susan DeVore took the company to a valuation of US$4.93b.
Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock.
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
DeVore’s pay and compare this to the company’s performance over the same period, as well as measure it against other
CEOs leading companies of similar size and profitability.
View out our latest analysis for Premier
What has been the trend in PINC’s earnings?
Earnings is a powerful indication of PINC’s ability to invest shareholders’ funds and generate returns. Therefore I will use earnings as a proxy of DeVore’s performance in the past year.
In the past year,
, which is a rather significant decline from its prior year’s profit (excluding extraordinary items) of US$491.62m.
Given that PINC has been loss-making in the past, hopefully
a wane in profits isn’t a signal of a reverting trend.
During times of
the company may be
a period of reinvestment and growth, or it can be
of some headwind.
In any case,
CEO compensation should
be reflective of
of the business.
In the most recent
by -6.12%, to US$6.21m.
In addition to this,
DeVore’s pay is also made up of 70.80% non-cash elements, which means that
in PINC’s share price can
level of what the CEO actually
Is PINC’s CEO overpaid relative to the market?
one size does not fit all,
should account for specific factors of the
company and market,
to see if PINC
deviates substantially from its peers.
helps investors ask
the right question about DeVore’s incentive alignment.
a US mid-cap
has a value of
earnings of $290M and
PINC’s size and performance, in terms of market cap and earnings,
it seems that
other US CEOs of profitable mid-caps.
of this expense.
What this means for you:
CEO pay is one of those topics of high controversy. Nonetheless, it should be talked about with full transparency from the board to shareholders. Why is DeVore remuneration above that of similar companies? Is this justified? As a shareholder, you should be aware of how those that represent you (i.e. the board of directors) make decisions on CEO pay and whether their incentives are aligned with yours.
If you have not done so already, I
you to complete your research by taking a look at the following:
- Governance: To find out more about PINC’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 PINC? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
The easiest way to discover new investment ideas
Save hours of research when discovering your next investment with Simply Wall St. Looking for companies potentially undervalued based on their future cash flows? Or maybe you’re looking for sustainable dividend payers or high growth potential stocks. Customise your search to easily find new investment opportunities that match your investment goals. And the best thing about it? It’s FREE. Click here to learn more.