Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis. 

What: Shares of micro-turbine maker Capstone Turbine (CPST) were on a tear, tacking on 13% this morning after the company announced lower losses on a double-digit top line growth for its second quarter.

So what: Capstone's revenue climbed 45% sequentially, and 17% year over year, to $35.3 million. More notably, its gross profit surged a whopping 88% to $4.9 million.

As a result, Capstone's gross margin expanded significantly to 14%, from just 9% year over year. This marked the fourth consecutive quarter of double-digit growth in the company's gross margin, indicating solid cost control on management's part.

The company has yet to turn a profit, but it cut its losses by a significant 42% year over year to $3.9 million, or $0.01 per share. Perhaps that's what got the market so excited.

The most notable part of the earnings report, though, was Capstone's growing backlog value, which increased 6% year over year to $149.8 million. Backlog is a key indicator of future potential revenue.

Now what: Solar installations may pose a threat to Capstone's power-generation equipment, but the company's order books are filling up fast. A "leading natural-gas producer" in the U.S. placed back -to-back orders in each of Capstone's last two quarters. Another Australian coal seam gas company, which has been a Capstone customer since 2008, placed a follow-on order in the second quarter. These two cases indicate Capstone's growing customer base and loyalty. Furthermore, Capstone also received orders from Mexico and announced expansion into the marine market in recent months.

Clearly, Capstone is not only expanding into global markets, but also foraying into new industries, which is good news for investors going forward. The company already ships 67% of its equipment today to the high-potential oil and gas sectors.

At the same time,Capstone is also starting to command higher selling prices for its equipment. Its average revenue per unit increased $17,000 sequentially, to $135,000 per unit in the last quarter. That should further push Capstone's revenue higher, and help the company turn profitable faster.

The good news is that Capstone expects its revenue to grow at an acceleratingpace over the next two quarters, and hopes to break even on operating earnings by the fourth quarter. I think this guidance, combined with Capstone's growing order book and narrowing losses, are compelling reasons to keep a close watch on this little stock.