Key Insights

• Sonic Automotive's Annual General Meeting to take place on 24th of April
• Total pay for CEO David Smith includes US$1.34m salary
• The overall pay is comparable to the industry average
• Sonic Automotive's total shareholder return over the past three years was 4.3% while its EPS was down 24% over the past three years

Share price growth at Sonic Automotive, Inc. (NYSE:SAH) has remained rather flat over the last few years and it may be because earnings has struggled to grow at all. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 24th of April. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Comparing Sonic Automotive, Inc.'s CEO Compensation With The Industry

At the time of writing, our data shows that Sonic Automotive, Inc. has a market capitalization of US$1.7b, and reported total annual CEO compensation of US$7.5m for the year to December 2023. That's mostly flat as compared to the prior year's compensation. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.3m.

On examining similar-sized companies in the American Specialty Retail industry with market capitalizations between US$1.0b and US$3.2b, we discovered that the median CEO total compensation of that group was US$7.2m. From this we gather that David Smith is paid around the median for CEOs in the industry. Furthermore, David Smith directly owns US$21m worth of shares in the company, implying that they are deeply invested in the company's success.

On an industry level, roughly 18% of total compensation represents salary and 82% is other remuneration. Our data reveals that Sonic Automotive allocates salary more or less in line with the wider market. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at Sonic Automotive, Inc.'s Growth Numbers

Sonic Automotive, Inc. has reduced its earnings per share by 24% a year over the last three years. It achieved revenue growth of 2.7% over the last year.

Few shareholders would be pleased to read that EPS have declined. The fairly low revenue growth fails to impress given that the EPS is down. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Sonic Automotive, Inc. Been A Good Investment?

Sonic Automotive, Inc. has not done too badly by shareholders, with a total return of 4.3%, over three years. It would be nice to see that metric improve in the future. As a result, investors in the company might be reluctant about agreeing to increase CEO pay in the future, before seeing an improvement on their returns.

To Conclude...

While it's true that the share price growth hasn't been bad, it's hard to overlook the lack of earnings growth and this makes us question whether there will be any strong catalyst for the stock to improve. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 3 warning signs (and 1 which is a bit unpleasant) in Sonic Automotive we think you should know about.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.