Key Insights

• Ambarella's Annual General Meeting to take place on 12th of June
• Total pay for CEO Fermi Wang includes US$561.0k salary
• The overall pay is comparable to the industry average
• Ambarella's EPS declined by 53% over the past three years while total shareholder loss over the past three years was 39%

The results at Ambarella, Inc. (NASDAQ:AMBA) have been quite disappointing recently and CEO Fermi Wang bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 12th of June. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. The data we present below explains why we think CEO compensation is not consistent with recent performance.

Comparing Ambarella, Inc.'s CEO Compensation With The Industry

At the time of writing, our data shows that Ambarella, Inc. has a market capitalization of US$2.3b, and reported total annual CEO compensation of US$5.8m for the year to January 2024. That is, the compensation was roughly the same as last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$561k.

In comparison with other companies in the American Semiconductor industry with market capitalizations ranging from US$1.0b to US$3.2b, the reported median CEO total compensation was US$5.7m. From this we gather that Fermi Wang is paid around the median for CEOs in the industry. Furthermore, Fermi Wang directly owns US$48m worth of shares in the company, implying that they are deeply invested in the company's success.

Speaking on an industry level, nearly 11% of total compensation represents salary, while the remainder of 89% is other remuneration. It's interesting to note that Ambarella 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.

Ambarella, Inc.'s Growth

Over the last three years, Ambarella, Inc. has shrunk its earnings per share by 53% per year. Its revenue is down 29% over the previous year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Ambarella, Inc. Been A Good Investment?

With a total shareholder return of -39% over three years, Ambarella, Inc. shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 3 warning signs for Ambarella that investors should look into moving forward.

Switching gears from Ambarella, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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.