Comarco Plans to Buy Back Up to 10% of Its Own Stock

Defense contractor Comarco Inc. said Wednesday that it plans to buy back as much as 10% of its 5.2 million shares of outstanding stock.

At about $5 a share, the stock price is not as high as the company thinks it should be. By buying its own stock at what it perceives to be a relatively low price, Comarco hopes to boost the price of the shares remaining in the market.

Comarco says it has increased its profits recently by moving into new businesses and de-emphasizing defense, which has been hurt by cuts in government spending.

The stock has traded over the counter for as high as $7 in 1991 and as low as $3.87 a share. It closed Wednesday at $5, up 12 cents, on the buyback news.

“Comarco has some new businesses outside the defense industry, but investors still think of us as a ‘defense stock,’ ” President Don M. Bailey said. “So our stock price has been running very low.”

The company provides expertise in computers and engineering to the military. For instance, the company manages a Navy weapons-testing base at Point Mugu on a $121-million contract over the next five years.

As the defense market has faded, Comarco has diversified into civilian businesses, such as making emergency telephone road call boxes for Los Angeles County. The company also manages smaller airports such as the one in El Monte in Los Angeles County.

Comarco’s percentage of revenue from defense business has dropped from 90% to 75% in 1991 and it plans to continue to reduce its dependence on defense.

The company credited the new businesses in part for a 60% jump in 1991 earnings, from $1.7 million to $2.7 million. Revenue totaled $80 million last year. Comarco lost money in the late 1980s, however, and its profits are just now beginning to climb to previous levels.

By buying back its own stock, a company increases the remaining shareholders’ return on equity in the company. That should make the stock more attractive and--at least in theory--raise its price.

Comarco is flush with $6 million in cash and says that the best way to invest is to buy its stock.