Capstone Turbine: 'Fueling' the Future

| About: Capstone Turbine (CPST)

Profitability may be the biggest concern for investors of Capstone Turbine (NASDAQ:CPST), but with the orders rolling in as they have been thus far in 2011, it's hard to believe that the company won't be able to get there at some point in the near- to mid-term future.

Granted, for profitability to present itself, expenses will need to be kept under control and, decent profit margins need to be had on sales, and a steady dent needs to be chipped away at the growing backlog. A recent order, however, announced on Monday for sixty C30 units from Capstone's Russian distributor BPC Engineering is added proof that this company's microturbine products are catching on globally and well worthy of the Presidential mention earlier this year.

This significant order, which has the 60 units destined for installation along a new gas pipeline being built in Kazakhstan, comes on the heels of some other pretty large orders and re-orders that have Capstone embedding its products into the global oil and gas market.

Darren Jamison, Capstone's president and CEO, stated in a Monday press release that the company has received a record number of order over the past year. Although it's only speculation as to whether this string of sales can continue at the current pace, there's no doubt that the Capstone momentum is in full swing right now.

What has not gained momentum, however, is the CPST share price. Having broken the two dollar barrier on numerous occasions, the stock has failed to remain above that level for any prolonged period of time.

Concerns about the need for additional financing has some investors skeptical, while others are unimpressed with the profit margins behind the production and shipment of Capstone's microturbine units, but the increasing short percentage -- which stands at roughly 20% of the float -- is a more telling number than either of the previously-mentioned factors.

The growing amount of shares short is an indicator that many out there believe that profitability for Capstone at any point in the near future is just a pipe dream, and that the prospects of financing are weighing heavily to stall any upward momentum for CPST. On the other hand, the short interest could quickly propel shares higher -- and possibly finally keep them trading at above the two dollar mark -- if news significant enough sparked a squeeze that had shorts covering in a hurry.

It would take a continues sales push to make that happen, in my opinion, a glimpse that profit margins were improving and that financing to keep production moving at a rapid pace was not going to be needed on a drastic scale.

While there are still concerns out there about the future of Capstone, there's no doubt that this company is quickly becoming a big player in the global market and it could be on the radar of companies such as General Electric (NYSE:GE) or Cummins Inc. (NYSE:CMI) as an acquisition target.

It's still worth keeping an eye on Capstone. This company is setting the stage for having its low-emission microturbines playing a big part of fueling the future.

Disclosure: I am long CPST.