High Financial LeverageElevated leverage increases interest and refinancing risk, reducing financial flexibility. Over a 2–6 month horizon higher debt burdens can constrain investment, force deleveraging actions, or amplify volatility in earnings if revenue or margins slip, making operations more fragile.
Weak Cash GenerationPersistent negative operating and free cash flows signal the business does not convert sales into sustainable cash, forcing reliance on external financing. This undermines long-term viability, limits reinvestment capacity, and heightens refinancing and liquidity risks over the coming months.
Declining Profitability MarginsCompression in core margins indicates management is facing cost or pricing pressures that reduce conversion of revenue into profit. Without structural fixes to costs or pricing power, margin erosion will persist and weaken cash flow and return metrics over a sustained multi-month period.