Despite strong share price growth of 44% for Kip McGrath Education Centres Limited (ASX:KME) over the last few years, earnings growth has been disappointing, which suggests something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 16 November 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

Check out our latest analysis for Kip McGrath Education Centres

Comparing Kip McGrath Education Centres Limited's CEO Compensation With the industry

Our data indicates that Kip McGrath Education Centres Limited has a market capitalization of AU$52m, and total annual CEO compensation was reported as AU$520k for the year to June 2021. We note that's an increase of 14% above last year. Notably, the salary which is AU$467.3k, represents most of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations under AU$269m, the reported median total CEO compensation was AU$561k. From this we gather that Storm McGrath is paid around the median for CEOs in the industry. What's more, Storm McGrath holds AU$2.9m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

On an industry level, roughly 60% of total compensation represents salary and 40% is other remuneration. Kip McGrath Education Centres pays out 90% of remuneration in the form of a salary, significantly higher than the industry average. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Kip McGrath Education Centres Limited's Growth

Over the last three years, Kip McGrath Education Centres Limited has shrunk its earnings per share by 13% per year. Its revenue is up 13% over the last year.

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. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Kip McGrath Education Centres Limited Been A Good Investment?

Most shareholders would probably be pleased with Kip McGrath Education Centres Limited for providing a total return of 44% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean returns may be hard to keep up. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 2 warning signs for Kip McGrath Education Centres that investors should be aware of in a dynamic business environment.

Switching gears from Kip McGrath Education Centres, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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