High-quality video is one of the fastest-growing niche markets within technology. And a key player in this niche is little-known Ambarella (NSDQ: AMBA), which went public last October at $6 a share and has since zoomed up to about $17 a share. We see more gains ahead as this little company continues to power ahead.

Ambarella develops leading-edge semiconductors for high-definition video and image processing that use very little power and fit on a single chip, known as a system on a chip (SOC). Its products are also used in TV broadcasting infrastructure.

Growth in small but powerful video recorders is being driven by these three trends:

(1) More Internet-connected surveillance cameras. Spurred by the Boston bomber investigation, security surveillance cameras are in demand in terms of quality and quantity.

(2) The popularity of consumer wearable cameras, such as GoPro and Dropcam, sales of which are increasing at a fast clip as sports and outdoors enthusiasts show off their exploits.

(3) Growing interest in automotive video recorders, known as “dash cams.” After being used in Russia to capture footage of a falling meteor last February, car cameras are likely to take off in the US eventually, especially if US auto insurance companies support their use.

Finally, there is the possibility that Google Glass (which embeds a video recorder into Internet-connected eyeware) will eventually take hold.

SOC-ing it to ’em. Since its launch in 2004, Ambarella has gained a competitive edge in the SOC business as its R&D efforts have allowed for smaller cameras capable of increasingly higher resolutions, while integrating new features such as de-warping technology that allows wide angle lenses to produce crisp, flat images.

Thanks to Ambarella’s superior product, its SOCs have scored a number of design wins are now found in equipment from a wide array of video-camera manufacturers. As a result, since going public last October, the company has consistently beat analysts’ earnings estimates.

Earnings per share (EPS) are growing at a 33 percent annual pace and revenue at a 24 percent clip. Operating profit margins are relatively high at close to 18 percent.

From a financial standpoint, Ambarella is surprisingly strong for a young technology company. It has no net debt and $104 million in cash on the balance sheet.

For fiscal 2013, ended in January, revenue came in at $121 million and EPS at 64 cents. First-quarter 2014 EPS were 17 cents on revenue of $34 million. The current consensus estimate looks for EPS of 84 cents in the current fiscal year and $1.06 in fiscal 2015.

Despite its strong growth, Ambarella is not expensive. It currently trades for around 20 times forward earnings vs. 28 times for the semiconductor sector. What’s more, Ambarella’s Return on Assets is 18 percent and its Return on Equity is 31 percent, both way ahead of its industry’s averages.

Ambarella does face stiff competition from the likes of Advanced Micro Devices, CSR, Canon and Sony. But by typically spending about a third of its revenue on R&D, Ambarella has consistently introduced SOCs that produce higher-quality video with more functionality than those of its peers. It has also been able to get higher prices for its cutting-edge products.

Given the likelihood of continued demand for highresolution video cameras, Ambarella seems well-positioned to produce strong growth for years to come.