This week’s annual Consumer Electronics Show (CES) in Las Vegas is showcasing a new generation of gadgets that reflect the convergence of consumer electronics, smartphones, the Internet, and satellites.

Notable case in point: the increasing ubiquity of global positioning system (GPS) capabilities.

GPS is a classic example of a once-classified, military-developed technology that was “spun off” into the civilian sector. Since the beginning of armed conflict, incomplete or inaccurate intelligence on the positions of both enemy and friendly units made it difficult for commanders to array their forces effectively. That, coupled with other unknowable facts such as enemy intentions and strength, helped create what has long been known as the “fog of war.”

As America grew more confident in operating beyond Earth’s bounds thanks to its victory in the space race, the US Department of Defense embarked upon the development of GPS to help cut through that fog.

This system was originally a network of 24 satellites—there are now 30—with their orbits arranged so that at least six satellites are always within line of sight from almost anywhere on earth. A GPS unit can use positioning data received for multiple satellites to determine its position with nearly pinpoint accuracy. That data can then be relayed to a command-and-control center, ensuring that military commanders always know precisely where their assets are located and allowing them to cut through at least some of the fog.

But that data is largely useless without hyper-accurate maps to put it into context, and those maps have come a long way since GPS became operational in the 1980s.

Initially, GPS locations were mapped against one-dimensional maps much like you would see in any atlas. But as technology has advanced, those maps now look a lot like video games, showing your position relative to buildings, geographical features and other landmarks thanks to satellite imagery, on-the-ground photography and other imaging capabilities.

As with most other military technologies developed over the years, GPS eventually found its way into the civilian sphere and now most of us interact with it on a daily basis through GPS units built into the dashboards of our cars, handheld GPS devices or our smartphones.

As the uses for and users of GPS technology have proliferated over the past decade, so has the number of companies that make the maps that allow the technology to be useful.

AutoNavi Holdings (NSDQ: AMAP) is the leading developer and purveyor of the advanced maps used in GPS applications in China.

The first Chinese company to be granted the licenses required to developed advanced maps, AutoNavi spent eight years conducting surveys, collecting geographical data and accumulating traditional photographic and satellite imagery to develop a map database covering most of China.

Thanks to its “first mover” advantage, none of the other 10 Chinese firms licensed to develop similar maps are ever likely to catch up with it in terms of the breadth and depth of AutoNavi’s data.

As a result, AutoNavi is the provider of choice for in-dash GPS units preinstalled in many automobiles sold in China. GM (NYSE: GM), Mercedes-Benz, BMW and Volkswagen are just a few of the major foreign automobile manufacturers who rely on AutoNavi, along with most domestic Chinese car manufacturers.

The company also licenses its map data to application developers and device manufacturers such as Samsung (Korea: 5930) and Apple (NSDQ: AAPL), which provide GPS capability integrated into smartphones for both navigation and location-finding purposes.

Despite its name, AutoNavi also supplies its mapping data to a number of government entities and corporate users for urban planning and development purposes, land use studies and planning for pipelines and other large-scale infrastructure projects.

AutoNavi has grown its revenues by more than 40 percent per year since going public in 2009, but the company’s shares have lost nearly a quarter of their value over that period.

The company’s subpar stock performance is even more surprising, in light of earnings that have more than tripled over that same period because of a relatively low cost of goods. While the company had to make a heavy upfront investment to develop its map database, there’s relatively little expense involved in maintaining it. As a result, the revenues realized from any data sales are licensing agreements that flow straight to the company’s bottom line, minus administrative costs.

That also means that it’s an extremely high-margin business, with a gross margin of 72 percent as of its last fiscal year and an operating margin of 29 percent.

The company also carries no debt, having paid off startup costs from its initial cash flows. The bulk of the company’s expenses now fall into selling and marketing, and research and development (R&D).

The company has been expanding its sales force over the past two years to reach out primarily to application developers and domestic Chinese automobile manufacturers. It also typically invests about 15 percent of revenues into R&D, developing capabilities such as Siri Chinese language search to better integrate its data with Apple’s software and mapping applications.

Currently trading at just 11 times forward earnings, the shares are undervalued considering the company’s phenomenal growth rate. While earnings growth is likely to slow to about 25 percent annually over the next few years, AutoNavi could easily command a much higher valuation.

I expect the valuation gap to close over the coming months for two reasons. The first is that there’s been a great deal of concern that Chinese automobile sales would slow along with the broader Chinese economy. However, as I’ve written several times over the past couple of months, the economic data coming out of China strongly suggests that the economy has bottomed out.

But even when there were strong signs of economic trouble in China, auto sales there have held pretty steady, maintaining a 12 percent growth rate per government data. While there have been a few months in which sales dipped recently, most of the decline can be accounted for by sharp sales reductions in Japanese-made vehicles, which is more reflective of nationalistic tensions than any economic malaise. As long as Japan and China remain locked in territorial disputes, Chinese consumers will likely continue to shun Japanese products.

Another major check mark in the company’s favor is that with the close of 2012 it will soon have three complete years of financial data available as a publicly traded company.

That’s a significant milestone, because most major American mutual funds, with the exception of those that specialize in young companies, require three years of financials to perform sufficient due diligence.

Now that the hurdle can be met, I suspect AutoNavi’s shares will begin appearing in the portfolios of many emerging market and China-focused mutual funds.

A great play on growing Chinese consumer demand and the newest addition to my Long-Term Portfolio, AutoNavi Holdings is a buy up to 15.