For the second day in a row after earnings, shares of gas microturbine maker Capstone Turbine (CPST) are on a tear -- and rightly so.

Thursday's earnings report, which showed Capstone growing its revenues 17% year over year in the second quarter of fiscal 2014 -- and nearly doubling its profits -- sent the shares flying 13% in Friday trading. Today, they're tacking on an additional 5%. But is it deserved? Let's find out.

Capstone: by the numbers
Reviewing Thursday's report, what we see is that Capstone:

  • Notched revenues of $35.3 million, a 17% increase from Q2 2012, with product revenues showing particularly strong growth of 22%
  • Achieved a gross profit margin of 13.9%
  • Generated cash from operations of $8 million

That's the good news. Now here's the bad: Capstone still isn't a profitable operation. Selling, general, and administrative expenses -- let alone R&D costs -- still ate up all of the company's gross profits and then some. Despite the improvement in gross profitability, the company still posted a loss from operations of $3.7 million, and lost $3.9 million (a penny a share) on the bottom line.

Nor is Capstone generating consistent cash profits. The company's trailing free cash flow figure is still negative $16.5 million, a number nearly as bad as Capstone's GAAP loss of $19.3 million for the past year.

Capstone on the cusp?
And yet, bad as its performance still looks in the rearview mirror, the simple truth is that Capstone really is looking healthier today that it once did. This is the first time that Capstone has generated positive cash flow from operations in more than 18 months, after all. What's more, if free cash flow at the firm is negative now, the company's promise to end this fiscal year with "a targeted cash balance of $30 million" suggests that management believes it will turn officially free cash flow positive within the next six months.

How positive might Capstone become? Its cash balance at present is just $28.3 million, so we're probably talking well over $1 million in real cash profits at the company by year's end. The fact that Capstone's third and fourth quarters are its "typically strongest quarters" of the year, and that it expects to post not just year over year, but actual "sequential margin growth in the second half of Fiscal 2014," adds further confidence to management's projection.

Farther out, analysts see the company potentially achieving real GAAP profitability as early as 2015, with the consensus being that long-term-earnings growth at the company could approach 25% annually over the next five years.

Foolish takeaway
Granted, even 25% growth may not be enough to justify the stock's price. It may sound silly to call a stock that sells for $1 and change "expensive", but the $0.03 per share that analysts think Capstone might earn in 2015 means that at today's price, the company still sells for 44 times the profits it may (or may not) earn two years hence.

Impressive as last week's results were, that's still a high price to pay for a firm that has yet to prove it can earn a consistent profit.