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TRW Automotive Holdings

TRW Automotive (TRW) is aiming squarely at the two most important trends driving the auto industry: fuel efficiency and safety. The company was a pioneer in the development of airbags and is benefiting from a rising number of airbags being built into every new car.

On the fuel mileage front, the U.S. and Europe have established increasingly tighter standards, and auto makers are currently working with TRW's latest fuel injection systems for models that will hit showrooms in 2013.

This is a company that was on the ropes in 2008, when long-term debt hit $2.6 billion. These days, that figure is closer to $500 million, allowing TRW to sharply boost spending on new products without running the risk of running out of money.

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Those investments may actually hurt profits in the near-term. The company is expected to show a year-over-year drop in profits when quarterly results are released later this week.

Analysts at Sterne Agee think profits will perk up starting this summer. According to them, "The investment for the new programs should begin to slow in the second half of 2012," which should help "earnings per share to reach a record level in 2013." The firm sees EPS hitting $7 next year, making shares a bargain below $42. Follow @stockpickr

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