As the war in Iraq drags on, Armor Holdings (NYSE:AH) continues to crank out the equipment enabling our troops and their vehicles to come through it intact. And the company is turning a tidy profit in the process.

In its earnings report for the first quarter of 2004, Armor Holdings announced that its revenues had doubled over the year-ago quarter, in which the latest Iraq war began. Earnings outpaced the revenue increase, with a nearly 150% increase to $0.42 per share, beating consensus estimates by $0.04. Gross margins edged up 0.4%, and operating margins increased 3%.

It goes without saying where the growth is coming from, but believe it or not, the above numbers do not fully reflect the growth in the company's armor products for U.S. soldiers and humvees in Iraq. If you analyze Armor Holdings' revenue growth by division, you will see that its Aerospace & Defense Group, which is responsible for manufacturing both the armor plates that attach to humvees, and the plate inserts that go into our troops' flak vests, experienced an astounding 400% growth in revenues.

After reporting results like those, it comes as no surprise that the company upped guidance for the full year. Armor Holdings now expects revenues to come in at more than $800 million, resulting in earnings per diluted share of $1.95 to $2.05. If the company hits those numbers, it will have a bargain basement P/E of 16.5. And when you consider that analysts expect it to continue growing earnings at a nearly 25% rate over the next five years, that would make Armor Holdings the very definition of a "value company" -- one with a PEG of 0.66.

Investing in the company has its risks, of course. Competition exists for the lucrative military contracts that are fueling Armor Holdings' growth, primarily from DHB Industries (AMEX:DHB) (a Hidden Gems Watch List stock), and Ceradyne (NASDAQ:CRDN), a stock that often appears on Hidden Gems' Foolish 8 list.

But truth be told, hostile forces in Iraq seem unlikely to run out of bullets or suddenly begin lining the paths of our Humvees with rose petals instead of IEDs any time soon. So long as dangers in Iraq persist, there should be more than enough work to go around for all of our nation's armor makers.

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Fool contributor Rich Smith owns no shares in any of the companies mentioned here.