Location Based Technologies Inc. (OTC-BB: LBAS) is one micro-cap company that may be worth watching. The manufacturer of personal GPS tracking gear and software’s industry is expected to grow at an annual compounded rate of 104% through 2012, according to a research report by RNCOS. This equates to substantial increases in sales over the next few years along with a higher valuation for companies like Location Based Technologies.

Revenues are expected to jump from $63 million in 2009 to $1.1 billion in 2013 as the market for personal GPS locators is embraced by concerned parents, cautious pet owners, and prudent employers. Meanwhile, earnings before interest in taxes could increase from $1 million in 2009 to $198 million in 2013. Assuming a discount rate of 5% and a 0% terminal growth rate, this means the cash flow in today’s dollars would be about $648.5 million, or $7.30 per share.

The $7.30 valuation represents a steep discount to the current $1.01 share price if the assumptions prove to be correct. Most investors will likely wait until the firm receives some necessary approvals and begins making sales in order to take a position. However, those investors willing to take the additional risk and purchase the stock ahead of time could benefit from a sharp increase in share price over the next few years.

Location Based Technologies expects to begin selling its products in the first quarter of 2009. The Oreo-sized GPS devices can be placed almost anywhere and tracked via phone or internet. A strong network of distributors and tight cost controls should help drive value in this company over the next five years. Meanwhile, a strong patent portfolio continues to build value in its technology. For an in-depth research report on this company, including financial projections, click here.