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Capstone Turbine Corporation (CPST) In A Perilous Reversal

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Capstone Turbine Corporation ( CPST) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Capstone Turbine Corporation as such a stock due to the following factors:

  • CPST has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $18.9 million.
  • CPST has traded 1.2 million shares today.
  • CPST is down 3.5% today.
  • CPST was up 5.6% yesterday.

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More details on CPST:

Capstone Turbine Corporation engages in developing, manufacturing, marketing, and servicing microturbine technology solutions for use in stationary distributed power generation applications worldwide. Currently there are 5 analysts that rate Capstone Turbine Corporation a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Capstone Turbine Corporation has been 8.3 million shares per day over the past 30 days. Capstone Turbine has a market cap of $666.8 million and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.24 and a short float of 14.6% with 5.06 days to cover. Shares are up 76% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Capstone Turbine Corporation as a sell. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:

  • The gross profit margin for CAPSTONE TURBINE CORP is rather low; currently it is at 21.30%. Regardless of CPST's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CPST's net profit margin of -5.91% significantly underperformed when compared to the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Electrical Equipment industry and the overall market, CAPSTONE TURBINE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • CAPSTONE TURBINE CORP reported flat earnings per share in the most recent quarter. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, CAPSTONE TURBINE CORP's EPS of -$0.07 remained unchanged from the prior years' EPS of -$0.07. This year, the market expects an improvement in earnings (-$0.05 versus -$0.07).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electrical Equipment industry. The net income increased by 51.1% when compared to the same quarter one year prior, rising from -$4.48 million to -$2.19 million.
  • Compared to its closing price of one year ago, CPST's share price has jumped by 129.22%, exceeding the performance of the broader market during that same time frame. Regarding the future course of this stock, we feel that the risks involved in investing in CPST do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.

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