So I’m wondering: If Iraq's "ours" now (under the “you break it, you bought it” axiom, if in no other sense), does it still belong to the Axis of Evil?

No matter, I suppose. In today's column, it's not the Axis of Evil concerning us, but the Axis of Good. Or more precisely, Motley Fool Stock Advisor recommendation Axsys Technologies (NASDAQ:AXYS), and the very good news it told us Wednesday evening. This purveyor of all things optical gave investors a triple dose of good news in the form of:

  • 40% sales growth in the fiscal second quarter.
  • 53% better profits than last year ($0.56 per share from continuing operations, or $0.55 net of a small loss from its discontinued AST Bearings business).
  • Promises of more growth to come.

Gross margins at Asxys zoomed ahead around 220 basis points, and operating margins improved by 170 basis points at the operating-margins level. So far this year, Axsys is pulling down better than 15% operating margins, superior to tiny rival Excel Technology (NASDAQ:XLTC) -- although it is still lagging industry heavyweight FLIR Systems (NASDAQ:FLIR), which boasts an enviable 25%.

Axsys expects more of the same going forward: "24% backlog growth in the first half of the year." The company told investors to expect close to $240 million by the time this fiscal year winds up, and something like $2.12 per share in profits.

Incidentally, investors in Textron (NYSE:TXT) and General Dynamics (NYSE:GD) should be listening closely to what Chairman and CEO Stephen Bershad had to say. Discussing the factors contributing to Axsys's dramatic growth in backlog, Bershad highlighted "large infrared lens orders for the Common Remotely Operated Weapon Station (CROWS) and Thermal Weapons Sight (TWS) II programs." CROWS are used on Textron's M1117 Guardian ASV, as well as on General D's Stryker APC.

Flip side
About the only bad news I found in the report ... wasn't actually in the report. Rather, it was found in the cash flow statement in the company’s 10-Q filing with the SEC.

And what did it say? That as contrasted with the $2.6 million in free cash flow generated through the first half of 2007, Axsys has a negative free cash flow of nearly $9 million so far this year. That definitely gives Axsys room for improvement in two respects come Q3: First, get that free cash flowing again. Second, tell us about it straight.

Related Foolishness:

Axsys Technologies is a Motley Fool Stock Advisor pick. Try this market-beating publication free for 30 days.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.