Is Honma Golf Limited's (HKG:6858) CEO Being Overpaid?

In 2016 Jianguo Liu was appointed CEO of Honma Golf Limited (HKG:6858). First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for Honma Golf

How Does Jianguo Liu's Compensation Compare With Similar Sized Companies?

According to our data, Honma Golf Limited has a market capitalization of HK$2.5b, and paid its CEO total annual compensation worth JP¥18m over the year to March 2019. We think total compensation is more important but we note that the CEO salary is lower, at JP¥17m. We looked at a group of companies with market capitalizations from JP¥22b to JP¥87b, and the median CEO total compensation was JP¥39m.

Next, let's break down remuneration compositions to understand how the industry and company compare with each other. On a sector level, around 89% of total compensation represents salary and 11% is other remuneration. So it seems like there isn't a significant difference between Honma Golf and the broader market, in terms of salary allocation in the overall compensation package.

This would give shareholders a good impression of the company, since most similar size companies have to pay more, leaving less for shareholders. While this is a good thing, you'll need to understand the business better before you can form an opinion. You can see a visual representation of the CEO compensation at Honma Golf, below.

Is Honma Golf Limited Growing?

Honma Golf Limited has reduced its earnings per share by an average of 13% a year, over the last three years (measured with a line of best fit). In the last year, its revenue is down 1.5%.

Unfortunately, earnings per share have trended lower over the last three years. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.

Has Honma Golf Limited Been A Good Investment?

With a three year total loss of 18%, Honma Golf Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

It looks like Honma Golf Limited pays its CEO less than similar sized companies.

The compensation paid to Jianguo Liu is lower than is usual at similar sized companies, but the eps growth is lacking, just like the returns (over three years). We would not call the pay too generous, but nor would we claim the CEO is underpaid, given lacklustre business performance. CEO compensation is an important area to keep your eyes on, but we've also identified 4 warning signs for Honma Golf (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

Important note: Honma Golf may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

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.

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