What's That About Small Packages?

Comarco, a tiny provider of engineering and computer services to the government, appears staid enough. But investors seem to think otherwise. Its stock is hot--up from 1 3/4 to 3 7/8 so far this year.

The hidden excitement: For a company whose market capitalization comes to about $20 million, Comarco has a huge order backlog--$600 million worth--including a $120 million contract with the Navy. Comarco provides a variety of services to the military, including weapon-system engineering and testing of air-launched missiles.

One of Comarco's fastest-growing units makes roadside telephone boxes for GTE, which sells them to state and city governments. So far, Comarco has shipped 6,000 call boxes that are equipped with cellular phones, including 4,000 for California's freeways and 600 for New York's parks and parkways. "We expect call boxes to grow into a $500 million business in five years," says President and CEO Don Bailey. Comarco has already captured 80% of that market.

Last year, the company's sales totaled $81.4 million. Some analysts expect earnings to jump to 65~ a share next year from an estimated 50~ this year and 30~ in 1989.

And some pros see more than just an earnings climb. Money manager Mike Murphy, who edits California Technology Stock Letter, believes Comarco is a takeover target. "Any aerospace company that wants in on Comarco's businesses is bound to make a bid," says Murphy. He thinks Comarco is worth at least $8 a share. The talk is that the company turned down an informal $5-a-share bid in 1990.

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