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CalAmp (NASDAQ:CAMP) is a turnaround story that seems to be near an important inflection point. CalAmp provides wireless communications solutions in the United States through its wireless DataCom and Satellite divisions. The company recently announced $15 Million in new contracts for its wireless Data Com division, an important development that should propel the company into profitable growth in the very near future. With only one analyst following the company, the fact that it is a very cheap stock, and additional catalysts forthcoming, we feel that the time is right to take a position in this name before institutions do so.

We have been tracking CAMP for months now. Insiders have been consistent buyers of the stock for the past year, a big positive that you want to see as a stock bottoms. In order for a stock to stage a successful bottom, a major new development needs to transpire in order for new long-term buyers to move into a stock. In CAMP’s case, we feel that its new product lines in its wireless DataCom unit will propel the company to consistent and profitable growth over the next 1-2 years.

During its last conference call in early January (the company is on a weird fiscal year ending in February each year), CEO Rick Gold stated:

We expect that growth in our satellite business over the next year will be driven by the launch of several new products that are currently in development. We also expect that our wireless datacom business, which is dependent to a certain degree on spending by governmental entities in the public safety sector, will improve as general economic conditions rebound. Looking further ahead, we believe that we now have the essential elements in place to grow CalAmp’s revenues back to an annual run rate greater than $200 million over the next 18 to 24 months, balanced between our satellite and wireless datacom businesses.

New products are an essential component to any turnaround story. CAMP seems to be no different. The company recently introduced the addition of four new products that will expand its portfolio for Mobile Resource Management [MRM] applications. Additionally, the company introduced its Phantom II product line, a highly secure, frequency-hopping IP data radio for the license-free 902-928 MHz ISM band. These new product lines should open the door to new revenue opportunities over the next 12 months. As these new product lines generate additional revenues, it will bring in a layer of growth to its rebounding satellite division, giving the company two divisions poised for incremental growth.

With its current market cap of $88 million, we feel that CAMP will begin to garner institutional interest over the next 1-2 quarters. Although we feel that the company should turn profitable over the next 1-2 quarters, we are not sure of when this will occur. We have a call into the company and are hopeful to speak with them next week in hopes of ascertaining management’s body language and tone during the call. We spoke with management six months ago, so it will be interesting to compare notes with our previous call.

Turning to the stock, CAMP still has some work to do on the charts. Due to the big layer of overhead resistance, we have begun with an initial position and will add more as it works through $3.4-$3.5 resistance.

With an improving backlog, profitability on the way, and an undervalued stock that will soon hit institutional radars, we feel that the risk/reward is very strong on CAMP at current prices. Should the CEO deliver on his goal of a $200 million company in the next 18 months, CalAmp could potentially double from current prices.

Author's Disclosure: long CAMP

Source: CAMP: A Turnaround Story Gaining Traction