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Jennifer Sherman became the CEO of Federal Signal Corporation (NYSE:FSS) in 2016, 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 Federal Signal pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

Check out our latest analysis for Federal Signal

How Does Total Compensation For Jennifer Sherman Compare With Other Companies In The Industry?

At the time of writing, our data shows that Federal Signal Corporation has a market capitalization of US$1.8b, and reported total annual CEO compensation of US$4.8m for the year to December 2019. That’s a modest increase of 7.7% on the prior year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$769k.

On comparing similar companies from the same industry with market caps ranging from US$1.0b to US$3.2b, we found that the median CEO total compensation was US$4.8m. This suggests that Federal Signal remunerates its CEO largely in line with the industry average. Moreover, Jennifer Sherman also holds US$11m worth of Federal Signal stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component 2019 2018 Proportion (2019)
Salary US$769k US$703k 16%
Other US$4.0m US$3.7m 84%
Total Compensation US$4.8m US$4.4m 100%

Talking in terms of the industry, salary represented approximately 16% of total compensation out of all the companies we analyzed, while other remuneration made up 84% of the pie. Federal Signal is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Federal Signal Corporation’s Growth

Federal Signal Corporation’s earnings per share (EPS) grew 46% per year over the last three years. It achieved revenue growth of 11% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. It’s also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. 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 Federal Signal Corporation Been A Good Investment?

We think that the total shareholder return of 67%, over three years, would leave most Federal Signal Corporation shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary…

As previously discussed, Jennifer is compensated close to the median for companies of its size, and which belong to the same industry. The company is growing earnings per share and total shareholder returns have been pleasing. Although the pay is close to the industry median, overall performance is excellent, so we don’t think the CEO is paid too generously. Also, such solid returns might lead to shareholders warming to the idea of a bump in pay.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That’s why we did some digging and identified 1 warning sign for Federal Signal that investors should think about before committing capital to this stock.

Important note: Federal Signal 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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