It’s like the senior prom for the aviation business: The Farnborough Air Show in the United Kingdom is a chance for companies to showcase their wares and tout their latest sales. It’s one way for industry players and investors to gauge who’s up, who’s down — and who’s out.

I attended the biannual Farnborough this year, held July 19-25th, which was host to 120,461 attendees and 1,450 exhibiting companies. One company in particular stole the show: An aircraft manufacturer based in Brazil, Embraer (NYSE: ERJ).

Remember that name, because it could break up the aircraft manufacturing duopoly of Boeing (NYSE: BA) and Airbus, bringing outsized returns to shareholders in the process.

Embraer racked up $10 billion in new orders for its aircraft at the show, an astounding feat for a relatively small company during an improving, but still dicey global economy.

Notably, U.K. regional airline operator Flybe announced at the show that it would order up to 140 Embraer regional jet aircraft, most of them the 88-seat Embraer 1755 model, for a total value of $5 billion.

Embraer is well positioned strategically, geographically, and in economic trends. Its aircraft are a best in class product — they’re sleek, “green” and easier to maintain than Boeing and Airbus’ models. Moreover, its home country of Brazil is one of the fastest growing aviation hubs in the world and should provide plenty of indigenous demand for its aircraft, both now and into the future.

There’s plenty of room for growth for this feisty company. It’s a relative newcomer to the smaller jet market, with enormous inroads to its credit in only a decade. Amid a crowded field of competition from the likes of Gulfstream International (AMEX: GIA), Bombardier, Dassault and Cessna Embraer will have an 8.2% market share, up from almost nothing in the last 10 years.

And while new business and an accomplished track record in relatively little time speak volumes, it’s the company’s fundamentals that underscore its attractiveness as an investment. Embraer’s price-to-earnings (P/E) ratio of 9.4 makes the stock a relative bargain, considering the company’s growth prospects — not to mention the industry average P/E is 16.4. Combine these factors with a healthy profit margin of about 9.1% and an operating margin of 7.7%, and the picture emerges of a stock in a good position to benefit from the aviation industry’s renewed growth this year and in 2011.

Embraer’s net income was up +3.7% in the second quarter, remarkable considering the industry’s dire straits during the first half of this year. The company earned $70.3 million in the quarter ending June 30th, an increase of $67.8 million from a year before. The commercial aviation segment, which produces regional jets, accounted for 61% of this revenue, while business jets contributed 14.4% and defense 13%.

Embraer’s future prospects look secure: the company reported an order backlog of $15.2 billion, equivalent to three years of projected annual revenue. Meanwhile, the company’s positive operating cash generation of $236.4 million in the second quarter boosted the net cash position to $658.7 million. Reflecting these positive factors, Embraer increased its annual revenue projection for 2010 by 5% to $5.25 billion this month.

Action to Take –> Embraer’s line of smaller aircraft are a serious threat to the rest of the aviation industry — they’re already being put into service in routes where major air carriers were hitherto deploying bigger aircraft made by rivals Boeing and Airbus.

And as if a slew of new orders, positive industry trends, undervalued shares and an enticing home base in one of the fastest growing economies in the world weren’t enough, Embraer has been rumored to be targeted for a merger with Airbus. In fact, Airbus’s parent, the giant aerospace conglomerate EADS, openly acknowledged its interest in such a deal at Farnborough.

I see the stock as a serious long-term portfolio candidate for investors looking an aviation play, although if the merger takes place, don’t be surprised to see the shares pop sooner rather than later.