Why Capstone Turbine Corporation (CPST) Hit a Five-Year High Today (Update)

Update (4:15 p.m.): Updated with five-year high price and Wednesday market close information.

NEW YORK (TheStreet) -- Capstone Turbine Corporation  (CPST) hit a five-year high of $2.60 on Wednesday as the microturbine manufacturer continued to climb after its announcement earlier in the week that it had received several orders from oil and gas companies.

Capstone said it received orders from E-Finity Distributed Generation for turbines that the latter plans to use in oil and gas operations in the Marcellus and Utica Shale regions. Marcellus is the biggest source of natural gas in the U.S. at 104,000 square miles in Pennsylvania and West Virginia.

Capstone received the orders from E-Finity, a distributor of Capstone turbines, but the companies that actually placed the orders were not identified.

"The Capstone microturbine product has been the first choice for recent new and existing customers and is being selected due to its proven ability to provide reliable power for the natural gas and oil industry," said Jeff Beiter, an E-Finity managing partner, in a statement.

The stock closed at $2.45, up 3.81% or 9 cents from its previous close of $2.36. It amassed a volume of 24,083,822, more than triple its average of 7,010,580.

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TheStreet Ratings team rates CAPSTONE TURBINE CORP as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate CAPSTONE TURBINE CORP (CPST) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 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 131.94%, 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.
  • You can view the full analysis from the report here: CPST Ratings Report

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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.

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