My loss is your gain.  Less than a month ago, I told readers about the potentially strong upturn in place for carbon fiber maker Zoltek (Nasdaq: ZOLT).

Thanks to a just-released quarterly report, shares are now up a heady 67% from where I recommended them. And that’s in just one month! I didn’t add the stock to my $100,000 Real-Money Portfolio, awaiting a better entry point that never arrived. Hopefully, you were able to get in the action and have been able to secure a tidy gain.

Here’s the odd part. This stock still has a lot more upside. After myriad false starts, this company is finally getting its act together.

As I noted last month, Zoltek built a great deal of manufacturing capacity a few years ago, only to find that demand wasn’t as robust as expected. As a result, those factories were heavily under-utilized, and a real drag on gross and operating profits. 

This dynamic appears to have changed. For the second quarter in a row, Zoltek saw a solid spike in sales. Last fall, the company announced that fiscal fourth quarter (September 2011) sales rose 38% to $43 million. On Friday morning, Feb. 3, the company followed up with a 43% year-over-year spike in sales to $47 million.

Analysts had been expecting about a nickel a share in profits. Zoltek instead earned $0.28 a share.  This works out roughly to a $1 a share in earnings on a full-year basis. All of this led to massive one-day rally, with the stock up 38% as of this writing.

It’s worth noting Zoltek’s profit potential is still constrained. The company’s factories are still under-utilized, and if quarterly sales move up to the $55 million to $60 million range, then margins would expand from better factory utilization, meaning Zoltek’s profits could grow even higher. The company speaks of hitting $500 million in annual sales by the middle of this decade. That’s a foolhardy prediction. Assume instead that sales max out at $300 million. At that level, Zoltek could still likely earn around $2 a share.

How realistic is this scenario? Well, when you consider rivals Hexcel (NYSE: HXL) and SGL-Carbon (which recently changed its name to SGL Group) are already operating at capacity, buyers of carbon fiber are turning to Zoltek to meet their needs.

There’s another reason to expect Zoltek’s sales to spike higher. Just this week (Jan. 30), U.S. regulators paved the way for further development of offshore wind farms along the U.S. Mid-Atlantic seaboard. All of those carbon turbines use carbon fiber. In fact, Zoltek’s biggest customer is Spain-based Vestas, which may play a key role in that offshore wind power program.

Risks to Consider: Make no mistake. This stock has scored quick gains, and investors need to know that Zoltek periodically stumbles backwards. Indeed, I wouldn’t be surprised to see this stock hit by profit-taking, perhaps back down to the $10 range. Then again, maybe not. The company will hold a conference call on Monday (Feb. 6), and if management can make a convincing case that quarterly results will be even better in coming periods, then shares are unlikely to slip back.

Action to Take  –> As investors start to fixate on Zoltek’s rising sales and firming margins, this stock could really hit its stride. I’m talking about $15 or even $20 (up from a recent $13). That’s why if you own shares now, you should resist the urge to book profits.  

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