Capstone Shares Surge After Orders

Who: Shares of Capstone Turbine rose 5.17% Wednesday and are up an additional 2.5% today. Capstone is the world's leading producer of low-emission microturbine systems. The company was the first to market commercially viable microturbine energy products, and has shipped approximately 7,000 microturbine systems to customers across the globe.

What: Capstone announced Wednesday it had received multiple orders for its microturbines. A single C1000 model and multiple C200s are destined for oil and gas offshore platforms, via its new Alaskan distributor Chenega Energy.

"Capstone microturbines are an amazing solution for Alaska's growing energy needs," said Chenega Energy President Greg Porter in a press release:

"With a state that covers an area 1/3 the size of the contiguous 48 states, our challenges are diverse. Rising energy costs, remote locations, and lack of a statewide grid infrastructure requires creative reliable solutions. In addition, often in this Arctic climate, 70% of our needs are heat. I believe we are seeing the beginning of a proliferation of Capstone solutions in Alaska across multiple industries and market sectors."

So what: This order could pave the way for more for currently unprofitable Capstone. Because of Capstone's reliability and proven performance, Hilcorp -- the company placing the orders through Chenega Energy -- plans to purchase more microturbines for its remaining five drill rigs that have yet to be renovated.

Now what: This is good news following a spike in Capstone shares after its recent earnings report. Capstone grew revenue 17% year over year in the second quarter of fiscal 2014, which initially sent its shares soaring 13%. Capstone also achieved a gross profit margin of 13.9% and generated $8 million in cash from operations.

However, not all the news was good for the company. Its general and administrative expenses, along with research and development spending, continue to eat up all of the company's gross profits. Going forward, Capstone is still becoming much healthier than it has been historically. That's reflected in its share price this year.

CPST Chart
CPST Chart

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The good news for investors who have stayed the course is that Capstone's fiscal third and fourth quarters are typically its strongest. Analysts also predict that Capstone will become profitable as soon as 2015, although it may not be enough to justify its current price after its 40% run-up this year; Capstone currently trades at a forward P/E of 62.5.

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