Margin CompressionDespite strong revenue, declining gross and net margins point to rising input costs, pricing pressure, or mix shifts. If persistent, margin erosion can offset revenue gains, constrain retained earnings and ROE, and limit the company's ability to sustainably fund R&D and capital expenditures.
Rising LeverageAn increased debt-to-equity ratio raises financial risk, reducing flexibility to invest or absorb demand shocks. Higher leverage increases interest and refinancing risk, potentially crowding out strategic spending and making the company more sensitive to rate moves and cyclical downturns over the medium term.
Weak Cash ConversionOperating cash flow lags reported earnings, indicating earnings are not fully converting into cash. Persistent weak cash conversion can strain working capital, limit dividend or capex flexibility, and increase dependence on external financing despite positive FCF metrics in the latest year.