Capstone: Still a Hot Company in a Hot Sector

Jun. 6.11 | About: Capstone Turbine (CPST)

Capstone's Presidential mention put the company's shares over the two dollar mark earlier this year, but just as quickly as the shares went up, they've come back down, closing last week at $1.60.

Heavy - and growing - short interest in the stock has been a concern during the rapid rise to two dollars, and concerns about the modest profit margins realized with Capstone's popular microturbines has only fueled that short interest, but sales have been picking up at an impressive pace during the opening of 2011, and it's the wrong time to be looking away from CPST, in my opinion.

Capstone has announced that the quarterly results for the fiscal fourth quarter will be released on June 14, and investors will be looking to not only see a growing backlog of orders - as the company announced a significant amount of orders and re-orders during the quarter - but also to see whether or not the pace of working through that backlog is picking up.

As noted in the last earnings go-round, units shipped were up significantly, and "Capstone's backlog at the end of the third quarter was $84.7 million, up 8% from the same period last year," according to company statements in the third quarter earnings press release.

The high dollar amount behind the backlog number would certainly look better on the company's bottom line. Of course, margins will also be looked at, because many believe that the company will not meet profitability any time soon unless the margins pick up.

As the stock dips down closer to where it traded to open the new year, it might be worth picking up a few shares, for those who consider the stock a long term winner.

The popularity of the company is growing, as evidenced by the increasing sales requests, and its products are quickly becoming the standard of many oil and gas projects around the globe.

It could be a volatile week heading into earnings on the 14th, but as Capstone continues to fuel the future, it's still a hot one in a hot sector.

This company's microturbines are growing in popularity as the global shift away from nuclear energy is already under way.

Additionally, this could be a nice and cheap pickup for a big player such as General Electric (NYSE:GE). Keep an eye on CPST.

Disclosure: I am long CPST.