Rising LeverageMaterially higher debt-to-equity reduces financial flexibility and raises interest and refinancing risk. For a services firm with working-capital needs and margin swings, increased leverage heightens vulnerability to revenue slowdowns or higher funding costs over the medium term.
Gross-margin VolatilitySharp swings in gross margin suggest unstable pricing, cost mix, or project delivery efficiency. Persistent margin volatility undermines predictability of profits and cash flow, complicating budgeting, pricing strategy, and investor confidence in sustainable profitability.
Weak Operating Cash ConversionOCF covering less than net income signals that profits don't fully convert to cash due to receivables or timing. In conjunction with higher debt, this raises liquidity risk and could force reliance on credit lines or delay investments during tighter market conditions.