At the start of the year, the prospects for Green Mountain (NASDAQ:GMCR) looked bleak. The stock had gone from a high of $111 in September to the low $40s. That was actually a good time to buy some shares. On news of Green Mountain’s latest earnings report, the stock is now trading at $65.63. Impressive, but investors still need to be cautious.

In the fiscal first-quarter, overall revenues more than doubled to $1.16 billion, with net income coming to $104 million (up from $2.4 million in the same period a year ago). Green Mountain has been getting lots of traction with its distribution partnerships with companies like Starbucks (NASDAQ:SBUX) and Dunkin’ Donuts (NASDAQ:DNKN).

Even with the stock’s recent run-up, Green Mountain’s valuation doesn’t look too expensive. The price-earnings ratio is 50, which seems reasonable in light of the company’s rapid growth rate.

But here’s the first caveat: About 20% of the float was represented by short positions, which is fairly high.

And it seems Green Mountain’s spike was probably helped by a “short squeeze.” Often when a stock gets positive news, short sellers become antsy and start to unwind their positions. This means they have to buy back shares. Yes, it can be brutal. However, a short-squeeze is usually brief, and it’s not uncommon for a stock to pull back after things calm down.

Something else to consider: Green Mountain has attracted some notable short-sellers, such as Greenlight Capital’s David Einhorn. Back in October, he released a blistering report on the company and questioned the accounting (using words like “shenanigans”).

While Einhorn is far from perfect, he does have a knack for spotting good short candidates.  A classic example was his deep analysis of Lehman, which came just months before its collapse in late 2008.

Yet, even if things are fine with Green Mountain’s accounting, the company may still face headwinds. In September, it will lose protection from two key patents. The result could be much more competition — even from Wal-Mart (NYSE:WMT) — which could hamper margins and revenue growth. Already, Green Mountain has shown volatility in its revenue record (as seen with its miss in November).

So in light of all these factors, it’s probably best for investors to stay on the sidelines for now. The shorts still probably still see opportunity with Green Mountain.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.