Revenue DeclineSustained revenue decline erodes scale and weakens the business model's growth engine. Over several quarters this reduces pricing leverage, limits reinvestment capacity, and makes recovery harder; persistent top-line weakness threatens long-term margin and earnings recovery.
Sharp Gross Margin CompressionA pronounced fall in gross margins indicates structural pressure from pricing, cost inflation, or adverse mix. Lower gross margins materially reduce operating leverage and sustainable profitability, making earnings and cash flow vulnerable unless the company restores pricing or cuts structural costs.
Low Return On EquityVery low ROE signals the business is generating weak returns on invested capital, limiting long-term shareholder value creation. Persistently low returns reduce reinvestment efficiency and make organic growth or value-accretive M&A necessary to improve structural profitability.