(FORTUNE Magazine) – FEDERAL SIGNAL Where there's smoke, there are fire trucks -- most often Federal Signal's. This diversified manufacturer, based in Oak Brook, Illinois, makes more fire engines than any other company in the U.S. It has a large share of markets for other noisy and flashing elements of public life as well: emergency medical service vehicles, the sirens and lights atop police cars, and custom-designed neon signs. Last year Federal sold $414 million of such gear, earning $23 million. For ten years its average annual total return to investors -- stock price appreciation plus dividends -- was 20%, ample inducement to pay attention to the sirens and flashing lights. While the stock market has been in decline, Federal's shares have hit new highs since August. George Zagoudis, an analyst with Barrington Research Associates in Barrington, Illinois, expects the company's sales this year to increase 7% and profits to rise 21%. The stock recently sold at $28.63, or 16 times Zagoudis's estimate of 1990 earnings per share. Federal got its start in 1901, when two employees of a Chicago electric company realized no one could make out downtown store signs at night. The fellows applied ingenuity and voltage, and soon one of the nation's first electric-sign companies was born. Today Federal's signs help light the Las Vegas strip and thousands of lower-wattage attractions. By the 1920s the company diversified into sound: police sirens and emergency horns for coal mines. Its air raid sirens warned Londoners during the Battle of Britain in World War II. The company's path into the fire truck business was through Emergency One, a struggling manufacturer in Ocala, Florida, that pioneered the use of aluminum bodies for fuel efficiency and easy maintenance. Federal bought it in 1979. Since then the unit's annual sales have grown more than tenfold, to an estimated $140 million. Volunteer fire companies and airports buy most of the trucks. Since 1984, Federal's sales have increased an average of 10% and earnings 20% annually. The company grows mainly by buying smaller businesses and expanding them, explains CEO Joseph Ross. In 1982, for example, Federal acquired Elgin Sweeper, which dominates the U.S. street-sweeping market with its Pelican, a $70,000 three-wheeled machine for in-city use, and its Eagle, a $90,000 four-wheeler for highways that can hit 60 mph with its brushes up.

PHARMACY MANAGEMENT SERVICES An employee paralyzed in an industrial accident and eligible for workers' compensation sometimes files dozens of separate claims each month to get reimbursed for all the drugs and equipment his doctor prescribes. Insurers can bog down in the paperwork. PMSI offers a pain reliever for both by serving as middleman. The patient simply calls PMSI with his prescriptions; the company, which has some 35 pharmacists and operates nationwide, delivers to the patient's doorstep, demands no payment, and submits a single itemized claim to the insurer once a month for reimbursement. Insurers avoid the administrative cost of handling complex cases and save on drugs and equipment as well, since PMSI carries some 60,000 items at competitive prices. In the fiscal year ended in July, sales by the Tampa company rose 64%, to $56 million, while earnings nearly doubled, to $2 million. The stock recently closed at $7.75, 15 times 1991 earnings per share as estimated by William Ritger of Dillon Read in New York City.

ACCLAIM ENTERTAINMENT Don't have a cow, man: ''Bart Versus the Space Mutants,'' Acclaim's videogame based on the hit television show The Simpsons, should be in stores by February. So will ''WWF Wrestlemania Challenge,'' a game featuring animated likenesses of World Wrestling Federation stars. The Oyster Bay, New York, videogame publisher was founded in 1987 when CEO Gregory Fischbach left his job as head of RCA Records International and caught the Nintendo wave. Under a license from the Japanese videogame maker, Acclaim develops and markets games for play on Nintendo consoles, which hook up to home TV sets. Its newest venture, Video Power, is a syndicated TV show that showcases characters from the latest games. In the fiscal year ended in August, Acclaim's earnings rose 56%, to $14 million, while sales rose 105%, to $141 million. The stock recently sold at $4.13, a scant five times 1991 earnings as estimated by independent analyst Vincent Turzo. But beware: Should the Nintendo craze peter out, Acclaim could find itself in deep water.

PORTA SYSTEMS When you telephone your aunt in Venezuela, this company will very likely help make the connection. Phone companies all over the world use Porta Systems' high-tech junction boxes to link neighborhood phone lines to local exchanges. Last year the Syosset, New York, company earned $5.8 million on sales of $62 million; over 20 years the business has grown at an average annual rate of 32%. The stock recently traded at $14.63, 12 times 1990 earnings per share, according to an estimate by analyst Richard Foote of Argus Research in New York City. Most of Porta Systems' sales are abroad, in a score of nations from South Korea to Hungary. British Telecom uses the company as its supplier for equipment to connect phone lines and protect them against power surges. Porta Systems' growth strategy is to target nations that are still in the process of industrializing, such as Mexico. The potential, says analyst Foote, is enormous: Virtually every new line to be hooked up must go through a connector.