More Reason to Believe in Capstone's Growth

| About: Capstone Turbine (CPST)

VFC's Stock House is not paid or compensated to cover Capstone Turbine.

Capstone Turnbine's (NASDAQ:CPST) low-emission microturbine units continue to grow in popularity as governments around the world shift towards greener energy, which these days does not include nuclear. Even as the big orders roll in, however, and President Obama jumps on the Capstone bandwagon, the road towards profitability has been marred by a growing short interest and modest margin percentages of the products.

The potential is there, and the large orders continue, but for Capstone to be cemented as a true contender to play a big role in fueling the future, profitability needs to be interpreted by investors as on the horizon. That's where turning the signficant backlog into deliveries and the continued booking of large orders come into play.

The backlog of orders, according to the company's most recent earnings announcements, is over the $100 million mark, not a bad place to be at a time when each quarter reports a new record for sales numbers as well. On top of that, new orders and service contracts are continuing as well.

Capstone announced last week that "it received another comprehensive fleet-wide service blanket order with Petroleos Mexicanos (PEMEX), the fourth largest crude oil producer in the world." The deal is valued at $8.6 million and will cover PEMEX's entire fleet of 44 Capstone microturbine units spread throughout the Gulf of Mexico. Not only does this order demonstrate the ability of this company to land big-valued contracts and sales, but it's also a demonstration of confidence in Capstone's products, as the big buyer keep coming back.

It's worth keeping note of the heavy short interest in the company's stock, since that's most likely the biggest driver behind the latest drop from the $2 mark, but this is a company on the way up that's in the right place at the right time. Let the growing sales and revenue growth serve as proof positive.

Disclosure: I am long CPST.