Margin CompressionDeclining gross and net margins point to rising input costs or pricing pressure that can erode long-term profitability. If structural, this reduces internal cash available for reinvestment or debt paydown, forcing tougher capital allocation choices and potentially weakening return profiles.
Volatile Free Cash FlowIntermittent free cash flow undermines predictable funding for capital projects, dividends and deleveraging. For a utility with ongoing capex needs, FCF volatility raises the risk that management must rely on external financing in down cycles, increasing long-term cost of capital.
Declining Return On EquityA falling ROE implies the company is generating lower profits from shareholders' capital, signaling less efficient use of invested funds. Persistently lower ROE can limit the firm’s ability to attract capital for expansion and pressure long-term shareholder returns relative to peers.