Gauging the quality of a CEO is an inexact science. Do you look at revenue growth? Increases in earnings? Decreases in expenses? Return to shareholders? Or do you use a combination of these plus a litany of other relevant variables that you think up?
The task is made even harder when CEOs are compared across other companies and industries. Who's to say, for example, whether Steve Jobs of Apple was a better leader and visionary than Jeff Bezos of Amazon.com? Both founded and led companies that provide great products and services to their customers, as well as market-smashing returns for shareholders.
Fortunately, a new service provided by Chiefist.com does the work for us. "Many of the annual exec rankings focus almost exclusively on share price improvement or some other concept of total return to shareholders," says the company's website. "While we like making a buck from our stocks as much as the next person, the notion of measuring executive performance based solely on the company's stock price pop over a 365-day period strikes us as simplistic and incomplete."
To normalize for variations across industries, in turn, the team at Chiefist developed its proprietary "Business Value Enhancement Metric," or BVEM, which employs a variety of metrics to rank CEOs of publically traded companies. Among other things, it incorporates margin expansion, earnings-per-share growth, and trends in both return on equity and book value per share.
Using this tool, at the end of last month I examined the best and worst small-cap CEOs. Over the preceding year, the stocks of the companies led by the best CEOs collectively outperformed the stocks of the worst-led companies by a staggering 92 percentage points. The former rose 60.8% on average, while the latter sank 31.4%.
What follows is Chiefist's current list of the 10 best mid-cap CEOs since the middle of 2010 (as with golf, a lower score is better):
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|2||Peter Wallace||Robbins & Myers||34.3||Add|
|3||Alexander Cunningham||WellCare Health Plans||35.1||Add|
|4||Philip Heasley||ACI Worldwide||36.6||Add|
|5||Clive Meanwell||Medicines Co.||38.3||Add|
Source: Chiefist.com, "Best Mid-Cap CEOs." *Only companies traded on U.S. exchanges are included.
An abbreviated rundown
As you can see, the list contains CEOs from a variety of companies and industries.
Stone Energy is one of the country's largest natural-gas producers. Fellow Fool Aimee Duffy included it in five natural-gas underdogs that "rarely make it into your water-cooler conversation, but are worth knowing about." Shares in the company are down since the beginning of August following the company's earnings miss of $0.62 a share versus the Zachs consensus estimate of $0.82.
FEI is the self-described world leader in the production and distribution of electron microscopes, which use electron beams to illuminate and magnify objects. Shares in the company jumped sharply at the beginning of the month after it reported record second-quarter results. It saw improvement on both the top and bottom lines, notching year-over-year increases of 5% and 16%, respectively. In addition, as noted by my colleague Brian Pacampara, it's been given a coveted five-star ranking in Motley Fool CAPS, our online community of 180,000-plus investors.
Jabil Circuit, the contract electronics maker, was recently named one of Fortune magazine's 2012 Most Admired Companies for the semiconductor industry. Despite this, following the company's third-quarter earnings report, Motley Fool blogger Harsh Chauhan noted, "Although its results came in line with Mr. Market's expectations, a light outlook for the current quarter suggested that the company was in for a difficult time ahead."
Shares in Nebraska-based Cabela's are on a tear of late, up nearly 90% since the beginning of the year. The popular outdoor retailer has recorded consistent year-over-year revenue growth for the last seven quarters, and it has grown same-store sales in six of those. Given this performance, I have to agree with my colleague Matt Koppenheffer, who noted that "the good times may continue for Cabela's in the quarters ahead."
Finally, Stratasys is the inventor of fused deposition modeling. What's this, you ask? Good question. In layman's terms, it's 3-D printing, or, as the company's website explains it, "an additive manufacturing technology that builds functional prototypes and production parts layer-by-layer in engineering-grade thermoplastics." Like Cabela's, Stratasys has destroyed the market this year, up more than 110%. This performance was validated at the beginning of the month by Stratasys' quarterly earnings, which impressed analysts on both the top and bottom lines.
The one thing these companies have in common
Despite their differences, these companies have one thing in common: superior share price performance. Indeed, as you can see in the chart below, with the exception of Stone Energy, all of these companies have handily beaten the broader market over the last 12 months, with Stratasys leading the way with massive total returns of 159%!
Foolish bottom line
Whether you use metrics like this to gauge a CEO's value or not, it's always important to trust the people leading the companies you're invested in. And it's for this reason that I invite you to view one of our newest free reports about three stocks that will help you retire rich. Of the stocks recommended, two of them are arguably led by the best CEOs alive today. To view this free report instantly, click here now.
Fool contributor John Maxfield does not own shares in any of the companies mentioned above. Motley Fool newsletter services have recommended buying shares of Cabela's, Stratasys, and FEI. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.