Advice from No. 1: Follow the light

Astronics CEO Peter Gundermann holds aircraft positioning lights (red on the jet's left side, green on the right), at his Lebanon, N.H., facility.

Quick Vote

Which FSB 100 company's products and services do you use most often?

• The Knot
• Nathan's Famous
• Jones Soda
• LivePerson
• Bankrate

or View results

Photos

The richest executives

These FSB 100 insiders each own $15 million or more in stock and options.

View photos

Full list: FSB 100

1. Astronics
2. Arena Resources
3. Bolt Technology
4. North American Galvanizing
5. Vasco Data Security

Companies in your state

Best stock returns

Most profitable

Galleries:

• 25 richest executives
• Past picks: Where are they now?
• Hall of shame: The big busts
• 5 smart stock picks
• Lessons from the fastest

Stories:

• How fast companies thrive
• No. 1, Astronics: 'Follow the light'
• Blow up your business model
• A flashy seller goes back to basics
• Building tech for future markets

(Fortune Small Business) -- Talk about special moments. Astronics (ATRO) has manufactured everything from airplane wiring harnesses to gear-grinding machines to plastic molding equipment in its 36 years. But one day its future CEO, Peter Gundermann, saw the light. Literally. And it was coming from the inside of his Honda (HMC).

"I was inside a business jet back in the late 1980s, and it struck me that my Honda CRX had a much better illumination system than that plane," says Gundermann, 45. "I said to myself, 'When it comes to lighting up airplanes, we can improve this industry.'"

The epiphany was well timed: Gundermann had taken over Astronics' aircraft lighting division a few days earlier. He began persuading Astronics' executives that the company should focus on bringing new technology to airplane wiring and lighting. They soon agreed and began the difficult process of selling off more than half-a-dozen other product lines.

"We have a family culture here," says Gundermann. "It's hard to tell a member of the family that we are going to redraw the boundaries." By 2003 nothing was left but the lighting division, "so they had to make me CEO," he jokes.

Gundermann's insight - call it capitalizing on your core competence - boosted Astronics' fortunes too. The East Aurora, N.Y., company is No. 1 on this year's FSB 100 list, with an impressive 43% growth in revenues last year, to $158.2 million. That's nearly five times its sales in 2003. Earnings per share more than doubled last year.

How did it happen? Since that revelation in the private jet, Gundermann has made Astronics into one of the world's leading providers of lighting and electrical systems to the aerospace industry, with products in everything from Cessna private jets to the Boeing 787.

Take, for instance, those very bright lights on the plane that illuminate the runway as the plane lands. They used to contain ordinary filament-style incandescent bulbs that lasted only 20 hours before they had to be replaced. At Gundermann's urging, Astronics devised new landing lamps using light-emitting diodes that can last the life of the plane.

Astronics' bread and butter, though, is supplying the transformers and wires to get power to the passenger seat on a commercial plane. That accounted for 63% of revenues last year and about half of sales the year before. If your airplane seat has an electrical outlet for your laptop, the odds are three in four that Astronics put it there. Though Astronics doesn't make the videoscreen on the back of your seat - Panasonic and Europe's Thales Group are the big players - it most often provides the wires to power them.

Despite its success, Astronics has given a bumpy ride to investors. Its stock climbed from $10.50 in early 2006 to $53.88 by December of last year. The shares then swooned with the broader market. But in February, Astronics plunged $10, to $22, when Gundermann revised his 2008 earnings predictions downward and announced that sales would be flat. ATRO has since drifted to the mid-teens.

The CEO argues that investors have been unduly spooked by the U.S. airline industry's well-publicized troubles. He points out that airplane makers, his customers, are flourishing.

"You had United Airlines announce record losses the same week that Boeing (BA, Fortune 500) announced its best quarter ever," he says. "I think it's confusing."

Of course, if airlines start announcing cancellations of existing orders, investor fears could be realized. One sign of trouble: In May, JetBlue (JBLU) announced that it was deferring delivery of 21 Airbus 320 aircraft.

Even so, Michael Ciarmoli, a securities analyst at Boenning & Scattergood outside Philadelphia, remains optimistic. He figures that U.S. airlines will soon upgrade the tired interiors of their cabins to keep up with more modern foreign fleets. Ciarmoli, who does not have a position in the stock, sees Astronics shares recovering to the high $20s by 2010.