Capstone Turbine: Inching Towards Profitability

Feb.14.12 | About: Capstone Turbine (CPST)

Capstone Turbine (NASDAQ:CPST) announced earnings for the company's fiscal third quarter last week, and although the company took another solid step forward on the path towards profitability, the general consensus on the street, according to numerous headlines from various sources, is that Capstone's report was an earnings "miss."

That said, the earnings were solid enough for an Ardour Capital analyst who slapped a two dollar price target on the stock to go along with an upgrade.

Revenue for the quarter came to $27.5 million, a similar number to the previous quarter, but this one showed higher margins; a strong sign for Capstone as investors have paid keen interest to that number during the long trek to prosperity.

Additionally, the long-growing backlog continued to increase and now stands at $115 million, which can be considered money in the bank. While the quarterly numbers were encouraging enough, it's also estimated that full year revenue will end up well over thirty percent higher than it was last year.

Even with the solid growth numbers, however, shares of CPST declined by ten percent on Friday, after having pushed higher during the previous weeks. Volume was more than twice the daily norm during the drop and, as mentioned above, numerous headlines emphasized the earnings "miss."

There may be contradicting opinions stemming from this report, but the evidence is there that Capstone is moving forward, not backward. Large orders and reorders continue to roll in, as evidenced by the growing backlog and plenty of press releases over the past few quarters, and the company has secured a continued collaboration with one of the major players in the industry, General Electric (NYSE:GE).

A continued push into the international market is also underway and US President Barak Obama found the company worthy of a mention during a speech in Brazil early last year.

As the global market shifts towards greener sources of energy, Capstone Turbine has positioned itself to take full advantage of that trend. Earnings may not have been blow-away enough for some, but another step forward in the path to profitability is all that should be expected at this point, and Capstone returns just that quarter-after-quarter.

Until the company reaches that goal, however, expect continued volatility and the continued presence of short sellers after any spikes, regardless of how insignificant they may seem.

This stock usually does a good job at bouncing off the dollar level pretty good, so if nothing else, the trading opportunities will be there while we wait for the profits to materialize.

Disclosure: Long CPST.