This article is part of our Rising Star Portfolios Series.

My research takes me in many directions, often resulting in dead ends. But last week I stumbled upon an intriguing company called Breeze-Eastern Corp. (NYSE: BZC). It has some wonderful qualities and looks appealingly priced, but there's a catch: I can't own it.

This is because in our Rising Stars portfolios we are limited to companies with market capitalizations of at least $200 million. Since Breeze-Eastern clocks in at $65 million, I can't buy it for my portfolio. But you certainly can, and I don't see why I should let a good idea go to waste, so here it goes.

The business
Breeze-Eastern makes rescue hoists and cargo hooks and winches for helicopters and fixed-wing aircraft platforms. It also makes weapons handling equipment. This sounds about as exciting as a bowl of gruel, but Breeze-Eastern is the world leader in these segments, with more than 50% of the global market. Its main competitor is a small division of Goodrich (NYSE: GR). What's more, these products have steady demand and relatively high barriers to entry; because the market is so small, significant engineering work is necessary, and customer relationships are important.

Breeze-Eastern was part of a larger corporate enterprise with a tumultuous history which I won't go into here, but since 2005 it has been steadily reducing its debt and improving operations. The arrival of new investment from Tinicum Capital Partners in 2006 and the appointment of new CEO Mike Harlan in 2009 have spurred an increase in free cash flow and a more-focused growth strategy. Breeze-Eastern is working out its kinks, which should benefit shareholders down the road.

Future and valuation 
The future for Breeze-Eastern looks solid with some upside. This is not a high-growth business. Indeed, it has been flattish over the past few years, but this could change. First, the company has significant content on the new European A400M cargo plane, built by EADS (NYSE: EADSY). This program has had funding and development issues in the past, but has flown and is moving into production. As this occurs, development costs for this program should wind down, boosting earnings, and revenues should rise. Second, the company is increasing its focus on research and development and new products. Third, a completed move into a new facility should increase productivity.

From 2004 to 2009 Breeze-Eastern earned annual operating profits of $9 million to $13 million. Moreover, operating cash flow has steadily climbed from negative $7 million in 2004 to positive $12 million in the trailing 12 months. Annual capital expenditures should be a few million dollars going forward, so the potential exists for annual free cash flow in the $6 million -$10 million range. At $7 per share, the market capitalization of $65 million looks pretty cheap for a company with these sorts of market positions and a positive outlook.

Risks to the company include the A400M faltering yet again. Also, the top two owners hold 48% of the stock, and the next three hold 23%, so there is a chance that the company will be taken private at an unreasonable price.

Take a spoonful
Strong market positions, an impressive management team, and potential for modest organic growth make Breeze-Eastern look more like vichyssoise than gruel. Take a spoonful today if you like what you see. I would if I could.