Sunday, April 18

Our View On Lions Gate Entertainment’s (NYSE:LGF.A) CEO Pay

Jon Feltheimer became the CEO of Lions Gate Entertainment Corp. (NYSE:LGF.A) in 2000, and we think it’s a good time to look at the executive’s compensation against the backdrop of overall company performance. This analysis will also assess whether Lions Gate Entertainment pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

View our latest analysis for Lions Gate Entertainment

How Does Total Compensation For Jon Feltheimer Compare With Other Companies In The Industry?

Our data indicates that Lions Gate Entertainment Corp. has a market capitalization of US$1.6b, and total annual CEO compensation was reported as US$11m for the year to March 2020. We note that’s an increase of 67% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.5m.

In comparison with other companies in the industry with market capitalizations ranging from US$1.0b to US$3.2b, the reported median CEO total compensation was US$11m. From this we gather that Jon Feltheimer is paid around the median for CEOs in the industry. Moreover, Jon Feltheimer also holds US$11m worth of Lions Gate Entertainment stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component 2020 2019 Proportion (2020)
Salary US$1.5m US$1.5m 14%
Other US$9.6m US$5.1m 86%
Total Compensation US$11m US$6.6m 100%

Speaking on an industry level, nearly 21% of total compensation represents salary, while the remainder of 79% is other remuneration. It’s interesting to note that Lions Gate Entertainment allocates a smaller portion of compensation to salary in comparison to the broader industry. It’s important to note that a slant towards non-salary compensation suggests that total pay is tied to the company’s performance.

Lions Gate Entertainment Corp.’s Growth

Lions Gate Entertainment Corp. has reduced its earnings per share by 88% a year over the last three years. It achieved revenue growth of 5.7% over the last year.

Overall this is not a very positive result for shareholders. The modest increase in revenue in the last year isn’t enough to make us overlook the disappointing change in earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Historical performance can sometimes be a good indicator on what’s coming up next but if you want to peer into the company’s future you might be interested in this free visualization of analyst forecasts.

Has Lions Gate Entertainment Corp. Been A Good Investment?

Since shareholders would have lost about 73% over three years, some Lions Gate Entertainment Corp. investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude…

As previously discussed, Jon is compensated close to the median for companies of its size, and which belong to the same industry. Meanwhile, earnings growth and shareholder returns have been in the red for the last three years. Considering overall performance, shareholders will likely hold off support for a raise until results improve.

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. We’ve identified 1 warning sign for Lions Gate Entertainment that investors should be aware of in a dynamic business environment.

Important note: Lions Gate Entertainment is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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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