Drone maker AeroVironment (AVAV 1.57%) had a great quarter and sees further growth up ahead. Investors are rallying into the shares as a result, with the stock up 28% and hitting a new all-time high as of 11:30 a.m. ET.

Growth is accelerating

AeroVironment is the maker of uncrewed aerial vehicles (UAVs) for the U.S. military and other customers. The company's products have been battle-tested by the conflict in Ukraine, which has also helped U.S. and allied military planners recognize the importance of UAVs in combat.

The company is seeing demand for its products soar. AeroVironment earned $0.63 per share in its fiscal third quarter ending Jan. 27 on revenue of $186.6 million, easily surpassing Wall Street expectations for $0.33 per share in earnings on sales of $170 million. Revenue was up 39% year over year.

"Solid bottom-line results, fueled by record demand and strong operating execution, have us on track for our best year ever," CEO Wahid Nawabi said in a statement. "In addition, the company continues to show tremendous growth in the Loitering Munition Systems segment, which delivered record revenue in the quarter."

AeroVironment is raising its full-year revenue guidance for the second consecutive quarter. It now expects total year sales of between $700 million and $710 million, up from a forecast of between $645 million and $675 million in sales made back in September. Wall Street was expecting $700 million.

Is AeroVironment a buy after its strong quarter?

AeroVironment reported net cash from operations of $26.9 million in the most recent quarter, dramatically above the $8.6 million reported a year ago. After years of discussing the potential for UAVs and AeroVironment's role in providing those systems to the government, investors are beginning to see that potential become reality.

The company finished the quarter with a funded backlog of $462.8 million in future business. The only downside is a lot of that future growth is arguably priced in, with AeroVironment trading at an enterprise value 28 times projected earnings before interest, taxes, depreciation, and amortization (EBITDA) following earnings.

If AeroVironment can continue to execute as it has so far in fiscal 2024, the stock can justify that valuation and grow from here. There are risks involved, but in an industry better known for stodgy income generators, AeroVironment is the rare publicly traded defense contractor with the potential for significant growth from here.