The compensation of a CEO for a publicly traded company is usually shared in SEC filings. But, comparisons to other broadcast media leaders aren’t.
That’s why “Simply Wall St.” has taken the initiative to determine whether the head of Entercom Communications is “paid enough relative to his peers.”
Entercom President/CEO David Field has been at the helm for some 16 years.
By comparison, Mary Berner took over as CEO of Cumulus Media on Oct. 13, 2015.
Do they have a similar salary as chief executives? What about other industry leaders?
Simply Wall St. offers a fresh look at Field’s compensation and compares it to CEOs at “similar-sized companies.” It then considers the growth in Entercom’s business, while concluding with an assessment of how common shareholders have fared in the past few years, as a secondary measure of performance.
“The aim of all this is to consider the appropriateness of CEO pay levels,” Simply Wall St. notes.
As of Tuesday (10/30), Simply Wall St. data show Entercom Communications with a market cap of $875 million. Its total annual CEO compensation is $3,476,457.
Right off the bat, Simply Wall St. finds that this is below last year’s compensation.
But, shed no tears for Field. Simply Wall St. looked at companies “in the same jurisdiction,” with market capitalization of between $400 million and $1.6 billion. It found that the median total CEO compensation was $2 million.
“We can conclude that David Field receives more in total compensation than the median of a group of companies in the same market, and of similar size to Entercom,” Simply Wall St. declares.
However, this doesn’t necessarily mean Field’s paycheck is too high.
“We can better assess whether the pay is overly generous by looking into the underlying business performance,” it explains.
It is not.
As illustrated above, Entercom has increased its earnings per share (EPS) by an average of 56% a year over the last three years. The company’s revenue is up 122% over last year.
“These metrics suggest the business is growing strongly,” Simply Wall St. says.
What about Entercom shareholders, who have a three-year total loss of 39%?
Any salary increase for Field may be conservative.
“The earnings per share growth over three years is certainly impressive,” Simply Wall St. concludes. “On the other hand returns to investors over the same period have probably disappointed many. While EPS is positive, we’d say shareholders would want better returns before the CEO is paid much more.”
Just before Noon Eastern on Wednesday (10/31), Entercom stock was trading at $6.50 per share on lower than average volume of 231,829 shares. It has a 1-year target estimate of $8 — last seen on July 16.
Is ETM poised to climb or dip further? Entercom’s level of debt of 112.7% compared to net worth is high — greater than 40%. While that is down from 197.9% in 2013, Simply Wall St. takes note of two red flags:
- Debt is not well covered by operating cash flow (2.6%, less than 20% of total debt).
- Interest payments on debt are not well covered by earnings (EBIT is 1.9x annual interest expense, ideally 3x coverage).
Then, there’s this look at Entercom’s 2017 performance:
- Entercom Communications has not efficiently used shareholders’ funds last year (Return on Equity less than 20%).
- Entercom Communications used its assets less efficiently than the U.S. media industry average last year based on Return on Assets.
- Entercom Communications’s use of capital has not improved over the past 3 years (Return on Capital Employed).
For Simply Wall St., Entercom’s value is in its future, and that’s why it is positive on the media company.
Then, there’s CNBC analyst Jim Cramer, known for his “Mad Money” program.
Entercom was noted by Cramer in the “Lightning Round” of Monday evening’s program. “I thought this stock would bottom. It cannot seem to find its footing,” Cramer said.
This led Bruce Kamish at TheStreet, its in-house technical analyst, to check the charts to see if Entercom was “weak looking.”
“The daily On-Balance-Volume (OBV) line has been in a downtrend from January and tells me that sellers of ETM have been more aggressive for months,” Kamish says. “The Moving Average Convergence Divergence (MACD) oscillator is pointed down and below the zero line – bearish.”
Kamish then looked at a Point and Figure chart for Entercom. A whole bunch of mixed messages emerged.
“The chart suggests that $1.50 is the price target, but there is tentative chart support from $6.25 to $4.25,” Kamish concludes.
That’s bad news for Field and his team at Entercom, as his bottom line strategy is to “stay bearish until prices can rally above $8.50.”
When will that happen? Perhaps in one week, as Entercom will release its Q3 earnings on November 6. Should they miss Wall Street estimates, the rally could be delayed — proof that improvements are on the way for Entercom.
When that happens remains uncertain.