High LeverageElevated debt-to-equity increases financial risk and reduces flexibility to pursue opportunistic investments or absorb downturns. Over a multi-quarter horizon, leverage magnifies earnings volatility, raises interest obligations and constrains capacity to deleverage if revenues soften or credit conditions tighten.
Declining Profitability MarginsCompression in EBIT and net margins signals rising operating costs, pricing pressure, or inefficiencies that can erode sustainable returns. If persistent, margin deterioration will limit internal funding for growth, reduce free cash flow conversion and weaken long-term profitability even with revenue growth.
Cash Flow VolatilityA high and variable free cash flow-to-net income ratio suggests uneven cash conversion and potential timing mismatches. Over the medium term this unpredictability complicates capital allocation, makes dividend or buyback planning riskier, and raises refinancing risk given the company’s elevated leverage.