The steps Capstone Turbine (Nasdaq: CPST) is taking to improve its long-term financial condition haven't helped the company's near-term earnings, and investors are feeling the pain today. The fourth-quarter earnings the company announced yesterday disappointed on the top and bottom lines despite increasing backlog.

In the fourth quarter, revenue was $22.76 million, but analysts had expected $25.97 million. Loss per share of $0.12 was well below the expected $0.03. Overall progress was strong in fiscal 2011, but investors were hoping for more.

A few weeks ago I highlighted the growing backlog at Capstone, which grew 26% to $106.4 million in the quarter. That doesn't include multiple orders made in the last two and a half months. But gross margin turned negative in the quarter on lower revenue, a point I highlighted as a concern at Capstone.

The Eagle Ford shale play, where Petrohawk (NYSE: HK) and EOG Resources (NYSE: EOG) have operations, and Marcellus have become major drivers of Capstone's future growth. As oil companies grow there, Capstone and competitor Cummins (NYSE: CMI) should both be able to capture more business in the area.

Foolish bottom line
The recently increased backlog has yet to show in reported financial results, that should change in coming quarters. The company has reported increased selling prices and consistent direct material, labor, and overhead costs, which will drive the company to profit if revenues improve.

The expected improvement would be welcome, but right now the company's market cap is 4.6 times 2011 revenue, a price too steep for a company that isn't profitable. I may miss out on a bounce when conditions improve, but even after today's discount, Capstone is too pricey for me.

Interested in reading more about Capstone Turbine? Click here to add it to My Watchlist to find all of our Foolish analysis on this stock.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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