Evergreen Solar (NASDAQ:ESLR) has watched its stock rise by more than 16% in recent trading. Investors, meanwhile, were applauding the announcement of Evergreen's largest contract ever -- a deal to provide photovoltaic cells (which convert sunlight into electricity) to PowerLight. The deal starts at $70 million over four years and could end up being worth as much as $170 million.

Evergreen manufactures solar cells for a variety of uses, from powering remote, rural homes to providing alternative energy sources for corporations. With growing concerns about traditional forms of energy consumption, this company hopes that its environmentally clean and efficient product will continue to gain acceptance.

Investors are certainly banking on the trend to continue: Evergreen's stock has risen by more than 300% this year. But is it all hype, or are there fundamentals behind the euphoria? Let's look more closely.

In the third quarter, Evergreen saw its top line grow by 87.3% to $11.2 million. Now through the first three quarters of fiscal 2005, it has achieved total revenues of $32.4 million, a 135% increase. Based on comments from CEO Richard Feldt, it appears that sales will remain brisk, with demand "expected to exceed supply."

Another major positive is the company's apparent move toward profitability. This time last year, the cost of products sold well exceeded revenues. In the third quarter of fiscal '05, however, Evergreen actually achieved positive gross margins of 10.4%. Its profitability will be a key metric for shareholders to monitor.

So with sales accelerating and margins improving, is it time to jump on board? Trading at roughly 16 times its $41.7 million in trailing-12-month (TTM) revenue, the company is pricey -- nearly in line with Google (NASDAQ:GOOG), which is valued at approximately 21 times its TTM revenues.

Sometimes you have to pay up for strong growth, but this kind of paying up looks more like speculation than investing.

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Fool contributor Jeremy MacNealy does not own shares of any companies mentioned.