Negative Operating Cash FlowNegative operating cash flow despite reported profitability is a durable red flag: it limits the company's ability to self-fund growth, raises refinancing risk, and can force asset sales, austerity or external capital, weakening long-term financial stability.
Rising Operating Costs / Falling EBIT MarginEroding EBIT margins point to structural cost pressures or less scalable operations. If sustained, margin contraction will reduce free cash generation and limit reinvestment capacity, making competitive positioning and long-term profitability harder to maintain.
Weaker Return On EquityA declining ROE signals the company is generating less profit per unit of shareholder capital. Over time this can indicate poorer capital allocation or diminishing competitive returns, pressuring investor returns and limiting the appeal of new equity financing.