Why Capstone Turbine (CPST) Stock Is Gaining Today

NEW YORK (TheStreet) -- Capstone Turbine (CPST) was gaining 2.5% to $1.25 Thursday after receiving an order for 75 C65 microturbines.

The 75-unit follow-on order was placed by Horizon Power Systems for several U.S. oil and gas companies. The Horizon Power Systems is Capstone Turbine's distributor for the Eagle Ford, Permian, Barnett, Mancos, San Juan, and Wattenberg shale plays.

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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 few notable weaknesses, 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 16.65%. 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 -29.11% 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.
  • In its most recent trading session, CPST has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.5%. Since the same quarter one year prior, revenues slightly dropped by 4.6%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Electrical Equipment industry average. The net income increased by 0.4% when compared to the same quarter one year prior, going from -$6.80 million to -$6.77 million.
  • 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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