Key Insights

• Ooma will host its Annual General Meeting on 6th of June
• CEO Eric Stang's total compensation includes salary of US$568.8k
• Total compensation is 225% above industry average
• Ooma's three-year loss to shareholders was 55% while its EPS grew by 14% over the past three years

Shareholders of Ooma, Inc. (NYSE:OOMA) will have been dismayed by the negative share price return over the last three years. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. These are some of the concerns that shareholders may want to bring up at the next AGM held on 6th of June. They could also influence management through voting on resolutions such as executive remuneration. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

How Does Total Compensation For Eric Stang Compare With Other Companies In The Industry?

According to our data, Ooma, Inc. has a market capitalization of US$233m, and paid its CEO total annual compensation worth US$4.4m over the year to January 2024. Notably, that's a decrease of 12% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$569k.

For comparison, other companies in the American Software industry with market capitalizations ranging between US$100m and US$400m had a median total CEO compensation of US$1.3m. This suggests that Eric Stang is paid more than the median for the industry. Moreover, Eric Stang also holds US$9.8m worth of Ooma stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Speaking on an industry level, nearly 16% of total compensation represents salary, while the remainder of 84% is other remuneration. Ooma pays a modest slice of remuneration through salary, as compared 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.

A Look at Ooma, Inc.'s Growth Numbers

Ooma, Inc. has seen its earnings per share (EPS) increase by 14% a year over the past three years. In the last year, its revenue is up 8.8%.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. 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 Ooma, Inc. Been A Good Investment?

The return of -55% over three years would not have pleased Ooma, Inc. shareholders. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would be keen to know what's holding the stock back when earnings have grown. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Ooma that you should be aware of before investing.

Switching gears from Ooma, 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.