Falling RevenueA significant revenue decline signals shrinking market traction or demand which erodes scale advantages and bargaining power with suppliers. If sustained, reduced top-line momentum constrains margin recovery, limits reinvestment capacity, and makes long-term strategic initiatives harder to fund without structural change.
Margin CompressionMaterial margin deterioration indicates either pricing pressure or rising costs that impair profitability. Persistently thin net margins reduce retained earnings and ROE, weaken the company's ability to absorb shocks, and limit resources for growth or property upkeep, making recovery and durable returns more challenging.
Free Cash Flow DeteriorationA severe drop in free cash flow and poor conversion of earnings to FCF constrains capital allocation flexibility. Even with low leverage, continued weak FCF limits capex, asset maintenance, acquisitions, or distributions, and raises the risk the company must seek external funding for strategic initiatives or to smooth operations.