Alliant Techsystems Still on Target

Knowing when to sell a stock is, in my opinion, the hardest part of investing. Hold on for every last nickel, and you risk the wonders of the "round trip" -- something I'm sorry to say I've done once or twice. Sell only because you think a stock is overvalued, and you might watch that stock continue to rise as it moves from "kinda expensive" to "are you kidding me?!?"

It is with that in mind that I say I really have no firm conviction about what you should do if you own Alliant Techsystems (NYSE: ATK). The stock seems rather expensive to me now, but the company is performing well and reducing some of its risk, and I can see potential sources of a future upside.

Alliant capped its fiscal year with a solid performance. Sales were up about 15%, and that was all organic growth. Margins softened somewhat, but the company still managed to deliver high-single-digit operating income growth on an as-reported basis. Investors should also note that the company refinanced $400 million in debt, taking a charge of $0.56 for a move that should cut both interest expense and some of the risk in meeting future numbers.

Top-line results were strongest in the ammunition business, but the precision systems unit also experienced dramatic margin improvement on lower restructuring expenses. Order growth was also quite healthy this quarter, jumping 56% on a large order for small-caliber ammunition.

I'm not going to just write off future growth opportunities for Alliant. The Iraq conflict is far from over, precision weapons should continue to be in demand, and who knows what NASA might have in store if leaders really are serious about more manned space exploration? And let's not forget, the U.S. does tend to find itself in armed conflict fairly frequently, so I wouldn't just assume that in the future there will be an automatic shift away from guns and bombs toward electronics and such.

Nevertheless, I think Alliant looks expensive, so I can't really encourage anybody to buy something I don't want. L-3 Communications (NYSE: LLL) and Innovative Solutions & Support (Nasdaq: ISSC), though, do look like they might be bargains, so investors interested in defense might want to at least consider these other options.

For more defensive Foolishness:

• Alliant Looks to Blend Old and New
• A Year Later, L-3 Still Looks Good
• Boeing's Parts Play

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).