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Since the time of my previous article of July 13, 2012, there have been exciting developments for Capstone MicroTurbine (CPST), all serving to reinforce my previously expressed view that the stock could triple in value. In fact, on September 5, 2012, a $2 target was initiated at Craig-Hallum, which exhibits confidence that the stock will double in value.

On CPST's earnings call of August 9, 2012, CEO Darren Jamison commented, "We are able to increase revenue year-over-year despite the challenging economic conditions worldwide due to two key factors: First, we continue growth in broadening of our distribution network; and secondly, the continued market acceptance of our new C200, C1000 Series microturbine products. Product revenue for the quarter was $23.6 million, up 13% year-over-year. New product orders totaled $24.1 million for the quarter, which, again, gave us a positive book-to-bill ratio. We shipped 25.1 megawatts, which was up 15% from 21.9 megawatts in the first quarter last year."

Edward Reich, CFO, informed, "Average revenue per unit increased to approximately $176,000 compared to $167,000 for the fourth quarter of fiscal '12 and $122,000 for the same period one year ago. These increases are the result of both higher pricing and a shift in mix for larger capacity products. Gross margin for the first quarter was $2.2 million, or 8% of revenue compared to $900,000, or 3% of revenue for the fourth quarter of fiscal '12 and $500,000, or 2% of revenue for the same period 1 year ago. The shift in mix to large capacity products increased pricing and lower material costs continue to drive improved gross margin. Capstone has now posted positive gross margins for 7 of the last 8 quarters. Most importantly, we again delivered positive gross margins, which we have now done in 7 of the last 8 quarters. Gross margins increased to 8% or nearly 600 basis points year-over-year as we realize strong sales volumes from higher kilowatt products and a 44% higher average revenue per unit while continuing to focus on reducing direct material costs."

The stock reached a 52-week high of $1.53 on February 7, 2012, and crossed above its 50-day moving average of $1.03 in intraday trading on September 13, 2012. Since my aforementioned article, the short interest decreased from 51 million to 49 million or 16.5% of the float, with institutions holding 40% of that float. I believe there is limited downside and a short squeeze is possible if the stock breaks above its 200-day moving average of $1.04.

Moreover, with $45 million cash and only $13 million in debt, CPST has a strong balance sheet. Considering the stock price, the company's performance, and the short interest, I expect CPST to make a strong upside move. Therefore, investors and traders in lower-priced stocks such as A123 Systems (AONE), GenOn Energy Inc (GEN), FuelCell Energy (FCEL) and JA Solar Holdings Co., LTD (JASO) should consider buying CPST, the only one of the aforementioned stocks with positive revenue growth and a positive forward P/E ratio. Without excluding the others as good speculative plays, CPST, with its apparent, impending turn towards profitability is well worth consideration.

Source: Capstone Part 2: Bounding Towards Triple Value