Capstone Turbine Corporation’s (NASDAQ:CPST) Profit Outlook

Capstone Turbine Corporation’s (NASDAQ:CPST): Capstone Turbine Corporation develops, manufactures, markets, and services microturbine technology solutions for use in stationary distributed power generation applications worldwide. The US$52m market-cap posted a loss in its most recent financial year of -US$10.0m and a latest trailing-twelve-month loss of -US$11.5m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on CPST’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for CPST’s growth and when analysts expect the company to become profitable.

Check out our latest analysis for Capstone Turbine

CPST is bordering on breakeven, according to the 6 Electrical analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$3.9m in 2021. CPST is therefore projected to breakeven around 2 years from now. In order to meet this breakeven date, I calculated the rate at which CPST must grow year-on-year. It turns out an average annual growth rate of 80% is expected, which is rather optimistic! If this rate turns out to be too aggressive, CPST may become profitable much later than analysts predict.

NasdaqCM:CPST Past Future Earnings January 8th 19
NasdaqCM:CPST Past Future Earnings January 8th 19

I’m not going to go through company-specific developments for CPST given that this is a high-level summary, however, take into account that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before I wrap up, there’s one issue worth mentioning. CPST currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in CPST’s case is 51%. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on CPST, so if you are interested in understanding the company at a deeper level, take a look at CPST’s company page on Simply Wall St. I’ve also compiled a list of pertinent factors you should further research:

  1. Valuation: What is CPST worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether CPST is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Capstone Turbine’s board and the CEO’s back ground.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.