BASEBALL'S KANSAS CITY ROYALS

finished last in their division this year, but at least they're about to be No. 1 in something. Come opening day 2008, Royals fans at Kauffman Stadium will get to watch replays of the team's struggles on the world's largest high-definition LED video display, courtesy of

Daktronics

The Brookings, S.D., company is small, with a market cap of $1.13 billion and forecasted sales of $524 million this fiscal year, but it's a giant in its business. When it comes to digital scoreboards and signage, from high school gymnasiums to state-of-the-art pro stadiums, Daktronics claims upward of 80% of the market. It also holds perhaps 70% market share in our "Minority Report" future where the nation's billboards are being converted into digital displays. And both markets are booming.

"There's a huge tidal wave of stadiums being built or upgraded," says Michael Alpert, manager of the Seligman Frontier A fund, which took a position in the stock earlier this year.

Part of that trend is just cyclical stadiums built in the last cycle of the 1970s are getting old. Then there's the move away from dual-use stadiums shared by both a football team and a baseball team. Now each sport gets its own facility. And part of it's just giving sports fans and athletes what they want.

"People are spending a ton of money to go to these games and they're demanding high-definition stadium screens," Alpert says. Or take Auburn, the college football program that recently went from a regular board to one of Daktronics' high-def displays. "Now everyone in the conference is going to have to match them because if you're going to recruit you want to show the kids that you have a high-def board."

Steven Dyer, an analyst with Craig-Hallum Capital Group, has totaled it up. Between new stadiums and upgrades, he sees 112 projects happening in the next three years. Consider that the Kauffman Stadium deal alone was worth $10 million to Daktronics, and business looks bright. Both the New York Yankees and the New York Mets are erecting new stadiums and those deals are expected to fetch $20 million each. Meanwhile, the Arizona Diamondbacks intend to have a new board worth $10 million to $12 million by opening day 2008.

"And the Dallas Cowboys want to build the largest screen in the world of course and people are speculating that's going to be a $30-million-plus deal," says Alpert. Daktronics historically wins more than three-quarters of the big stadium deals on which it bids. (Mitsubishi stands to win some, too. The Japanese electronics conglomerate knows that having one of its giant HDTVs in a marquee venue is good advertising.)

Longer term, the sports side of the business isn't even the exciting high-growth part of the story. "Billboards are kind of the sexy part of the stock," says Dyer, who rates shares at Strong Buy. (Analysts' average call sits between Buy and Hold, according to Thomson Financial.) "They've grown their digital billboard business 100% for two consecutive years. There's almost half a million billboards in the country and only 600 or 700 thus far have been converted to digital."

Lamar Advertising and Clear Channel Outdoor control roughly 300,000 of the nation's billboards. Alpert believes Daktronics now has as much as three-quarters of the Lamar business and perhaps 70% at Clear Channel.

Needham analyst James Ricchiuti, who rates shares a Buy, regards the company as one of the strongest organic growth stories he covers. "We expect bookings to remain strong over the next several quarters in Daktronics' core sports market and commercial business, notably digital billboards," the analyst wrote last month.

As strong as the fundamentals sound, this has been a brutally . That's largely because the company's revenue is so lumpy. It's tough to predict when the company will win big stadium deals, meaning a contract expected for the end of one quarter can easily slip into the next, blowing up the previous quarter. The revenue still rolls in, it's just tough to model when. Meanwhile, the announcement of a big new deal often puts too much exuberance into the shares.

"This stock has had periods where it's tended to get a little ahead of itself in terms of valuation and then tends to swing to the opposite end of the spectrum after they disappoint," Dyer says. "There are days that you wake up and the stock is 25% cheaper than it was the day before."

For now the valuation is still appealing. The stock closed Tuesday at $28.44, putting the forward price/earnings multiple at 27. That's plenty reasonable for a company with a projected long-term growth rate of 25%.

And then there are those very big potential near-term catalysts. The Yankees, Mets, Cowboys and Diamondbacks are expected to announce their high-def scoreboard plans soon. "If Daktronics wins three of those four, the stock is gonna rip," Albert says.