When it comes to companies involved in the alternative energy space, the buzzwords seem to be anything related to "profitability" or "cash flow positive." FuelCell Energy (FCEL -4.91%) is no different. Look for further hints of profitability or a cash-flow-positive status when this fuel cell company reports on Dec. 17.

Why profitability is a big deal
When Tesla (TSLA 1.97%) reported its first quarter of profits in May 2013, the stock exploded, up as much as 474% this year. This is despite the fact that Tesla's adjusted earnings per share have been consistently just a few pennies in the quarters since, hardly justifying a share price near $150. When it comes to a new way to generate or use power that avoids the petroleum pump, any company even nominally profitable like Tesla seems to be met with great excitement among the crowd.

Then there's Plug Power (PLUG -4.15%). When it announced that it expects orders of such high magnitude that it will turn the company profitable next year, its stock price shot up like a rocket, rising as much as 183% in just three trading days. This is despite the fact that Plug Power has been forecasting – and missing – profitability and other forecasts for several years. For example, CEO Andy Marsh stated back in early 2009, "We will continue to grow our business and forge a path to profitability in 2009." Instead, Plug Power went on to lose over $150 million in bottom-line net losses.

The point of using Plug Power as an example is to demonstrate that the mere hint of profits – no matter how questionable the forecast – can lead to enormous price appreciation. If FuelCell Energy solid profits that Plug Power only hopes to produce, it could make for one heck of a story among the alternative energy crowd.

Follow this with FuelCell Energy's report
Last quarter, FuelCell Energy reported record revenue of $54 million along with record gross profit of $5.4 million. As a percentage of sales, gross profit has been steadily rising each quarter. FuelCell Energy expects margins to continue to expand

The higher the sales the more easily gross profit from sales can cover overhead. CEO Chip Bottone explained, "Our margins are expanding from higher production levels as fixed costs are absorbed by the greater sales volume and cost reductions flow through the financial statements."

Not only look for higher revenue, but look for higher or at least large backlog as well. Last quarter, FuelCell Energy reported $380.8 million in backlog or over seven times the quarter's worth of revenue. That alone should keep FuelCell Energy busy for a while.

The company reports and measures its production levels in megawatts. Last quarter, it stated that it was producing at the 70-megawatt rate and needs production at the 80-megawatt level to become profitable on an earnings before interest, taxes, depreciation, and amortization basis.

While FuelCell Energy didn't give an exact date of when it expects to achieve the Holy Grail 80-megawatt production rate, the production rate has been steadily increasing. For example, earlier this year FuelCell Energy was only at the 56-megawatt production level before increasing 14 points. Now with 10 points left to go to achieve the 80-megawatt rate, it would seem to be a more realistic feat. If FuelCell Energy hasn't hit this production level yet with its upcoming report, take notice how close the company is and what guidance management gives in its conference call toward hitting this level.

Foolish final thoughts
FuelCell Energy is an interesting idea that has steadily increasing sales, profit margins, and a huge backlog to support them both. Dare I say it reminds me a bit of Tesla? While FuelCell Energy still has a long ways to fundamentally justifying a high valuation based on already reported numbers (which aren't yet profitable), Fools should put FuelCell Energy on their radar screens. Once it turns the corner to profitability, the company could be off to the races.