Investors apparently liked what they saw in CalAmp's (NASDAQ:CAMP) second-quarter report and boosted the stock by more than 10%. One does wonder, though, where the stock of this satellite and wireless equipment vendor will be heading next. If you look at a chart of the past 10 or 15 years, you'll see a pattern not unlike that of the Himalayas, or at least the Tetons -- very high highs, followed by sharp disappointments and sell-offs.

In the aforementioned quarter, revenue rose 13% to just less than $58 million and gross profit improved by 30% as the company benefits from higher ASPs in the satellite business and forgoing lower-margin business in the solutions division. Operating income also improved dramatically, and bottom-line profits more than doubled.

Although the company is working on diversifying its revenue base, it is still effectively a play on DBS (direct broadcast satellite) demand. CalAmp is the leading supplier of outdoor equipment for the DBS market -- dishes, feedhorns, and related electronics -- and gets about 60% of its sales from EchoStar (NASDAQ:DISH) and DirecTV (NYSE:DTV).

Luckily, the company is seeing not only increasing demand from new satellite subscribers, but also demand for upgraded equipment as the content providers look to offer more high-end programming like HDTV. New equipment for DirecTV is in the final stages of approval, and work has begun on new products for EchoStar as well. As these new products offer more functionality, they also carry a higher average selling price for the company -- mid- and high-end ASP products now make up 80% of sales versus 58% a year ago.

Obviously, CalAmp would be in bad shape if it lost one of its satellite customers to a rival like Sharp or Andrew (NASDAQ:ANDW). To mitigate some of this risk, the company continues to try to grow its two-way wireless business and will certainly look for growth from its recently acquired machine-to-machine radio product business.

Looking further out, the company hopes to be a player in the Wi-Fi and WiMax markets. This is a hot space, and companies ranging from Intel (NASDAQ:INTC) to Cisco (NASDAQ:CSCO) to Qualcomm (NASDAQ:QCOM) have been working on platforms. But it's still very early in the game, and CalAmp doesn't have any major traction here yet.

CalAmp is still a very small company with very significant dependence on just two customers. If you need more proof of the potential risks, take another look at that long-term chart. That said, the stock is trading at only a mid-teens P/E, which may be an attractive price for a company with a solid, cash-generating base business and the potential to take part in the growth of Wi-Fi and/or WiMax in the future.

For more wired takes:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).