Net Margin CompressionA sharp decline in net margin signals worsening earnings quality after operating costs and credit expenses, reducing retained earnings and the firm’s ability to self-fund growth or dividends. Persistent margin pressure would materially weaken long-term return generation and capital reinvestment capacity.
Weak Free Cash FlowNegative FCF and very low operating-cash-to-net-income conversion point to cash generation issues despite accounting profits. This constrains debt reduction, capital spending, and shareholder distributions, increasing reliance on external funding and reducing operational flexibility during stress periods.
Declining Return On EquityA falling ROE indicates the company is generating substantially less profit per equity unit, reflecting margin or credit deterioration. Sustained ROE decline undermines shareholder returns and signals inefficiencies that must be addressed to preserve long-term value creation and capital attraction.