Poor Free Cash Flow TrendA steep decline in free cash flow growth signals worsening cash generation versus reported earnings, likely from higher capex or working capital. If persistent, this undermines the company’s ability to self-fund investments, dividends, or debt repayments and raises refinancing risks over many quarters.
Weak Cash ConversionLow conversion of earnings into operating cash suggests earnings quality or timing issues in receivables/inventory. Over time, weak cash conversion can strain liquidity, force external financing, and limit capital allocation flexibility, materially affecting operations across 2–6 months and beyond.
Rising Leverage RiskAlthough leverage is moderate today, the noted trend of increasing debt elevates interest and refinancing exposure. If demand cools, higher leverage could compress margins and reduce strategic optionality, making the business more vulnerable during downturns over the medium term.