Leading Agellan Commercial Real Estate Investment Trust (TSE:ACR.UN) as the CEO, Frank Camenzuli took the company to a valuation of CA$477.26m. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor. I will break down Camenzuli’s pay and compare this to the company’s performance over the same period, as well as measure it against other Canadian CEOs leading companies of similar size and profitability.
Did Camenzuli create value?
ACR.UN 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. In the past year, ACR.UN released a profit of CA$86.35m , which is an increase of 209.74% from its last year’s earnings of CA$27.88m. This is a positive indication that ACR.UN has strived to maintain a good track record of profitability in the face of any headwinds. Since earnings are heading towards the right direction, CEO pay should represent Camenzuli’s hard work. Over the same period Camenzuli’s total compensation increased by a mere 3.03% to CA$287.85k. TSX:ACR.UN Past Future Earnings July 25th 18
Is ACR.UN overpaying the CEO?
Even though one size does not fit all, since compensation should be tailored to the specific company and market, we can fashion a high-level benchmark to see if ACR.UN is an outlier. This exercise can help direct shareholders to ask the right question about Camenzuli’s incentive alignment. Generally, a Canadian small-cap is worth around $345M, creates earnings of $24M, and remunerates its CEO circa $770,000 per annum. Considering ACR.UN’s size and performance, in terms of market cap and earnings, it appears that Camenzuli is compensated similar to other comparable Canadian CEOs of profitable small-caps. This indicates that Camenzuli’s pay is fair.
In order to determine whether or not you should invest in ACR.UN, 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 ACR.UN 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 ACR.UN’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 ACR.UN? 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 pass 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 firstname.lastname@example.org.