A Smoother Flight for Herley Industries

Herley Industries (HRLY ) is a tiny company beginning to make big waves. A specialist in developing microwave technology for defense instruments, it posted record first fiscal quarter profits in December of 22 cents per share on $27.3 million in sales, vs. a loss of $2.3 million a year ago. That sent the stock up 14% in December, to 17, though it's still way below its April high of 24.62.

With a market cap of just $255 million, the 36-year-old Lancaster (Pa.) company isn't covered widely by Wall Street. But its products, used for navigation and data communication, are becoming known worldwide. Last September, Herley acquired EW Simulation Technology, a British maker of electronic warfare simulator systems. Herley has struck up new business in South Korea, Spain, and Israel. It's also generating free cash flow of more than $1 million a month, some of which is currently being used to buy back shares. Defense analyst Steve Wortman of New York's Sidoti & Co., who reiterated his buy rating on Dec. 13, says the stock could return to its former high in a few months.

By Mara Der Hovanesian

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