Share price doubles for American Science

Investors like what they see in X-ray equipment vendor American Science and Engineering Inc.

Shares in the Billerica maker of surveillance equipment for homeland security, border police, and cargo inspection work nearly doubled in price during 2005 and have kept rising.

Executives say bets made long ago have begun to pay off for the company, which has 300 employees and is hiring more. For example, chief executive Anthony R. Fabiano has scaled back American Science's promotion of its tractor-trailer-sized inspection systems that cost $2 million each in favor of lighter, smaller van-mounted systems. They do the same work of scanning shipping containers for everything from radiation to human stowaways, but for prices starting at two-thirds less. It has become the industry's best-selling cargo-inspection system, with more than 180 units delivered.

The bottom line: From a loss of $8 million in the fiscal year just before Fabiano's 2003 arrival, American Science has swung to an $11 million profit for the year ended March 2005.

Going forward, Fabiano has been emphasizing increasing sales to foreign governments, to diversify away from US agencies that have accounted for up to 85 percent of the company's business. Fabiano said the key lesson he has learned is how important it is ''to build bridges with customers by listening and focusing on their needs, wants, and expectations for products and technologies, as opposed to pushing them to buy only what's in our portfolio. You'd be surprised at how many companies make that mistake every day, not listening and not giving the customers what they want."

Joshua L. Jabs, analyst at Roth Capital Partners LLC, a Newport Beach, Calif., research and investment banking company specializing in smaller stocks, said, ''AS&E has done a terrific job of adapting to conditions, innovating, and finding new markets."

Still, Jabs rates the stock a neutral, not a buy. That's partly because shares are expensive after last year's run-up, and because of the ''lumpiness" of its sales cycle, with government orders coming in sporadic bunches, making profits hard to predict smoothly.

American Science was formed in 1958 as a scientific instrument developer for astronomers, before it found better business in defense contracting. Traditional X-ray systems, like those used by dentists and by doctors fixing broken arms, transmit their rays through a subject to be captured on film or sensors on the other side. American Science specializes in ''backscatter" X-rays whose beams bounce back to be read at the source.

Backscatter technology is simpler for checking cargo containers, and valuable in covert work and espionage. But American Science also has faced public resistance to its SmartCheck system for detecting bombs on people because it effectively looks through their clothes to produce images of their bare bodies underneath.

Last summer, the company and the Transportation Security Administration began working to develop software that blurs potentially sensitive image areas. Spokeswoman Ann Davis said the agency expects to begin public evaluations of the system soon.

Ross Kerber can be reached at kerber@globe.com.