Last July, General Dynamics (NYSE:GD) shares took a sudden leap following a profit-laden earnings release, only to beat a hasty retreat. It appears that history repeated itself this week, as the General's shares posted an 8% post-earnings gain, followed by today's 3% pullback.

In fact, the more you study GD's stock, the more you notice that investors consistently underestimate the General's profit-making prowess. When it invariably proves itself, these same investors first overreact, then grab their profits and run, lest the company fail to repeat its outperformance (though it always does). I have no such fears.

Top dog in the defense industry
Over the course of fiscal 2008, General Dynamics grew its revenue less than 8%, yet translated this moderate sales growth into an amazing 22% rise in per-share profits. Operating profit margins tacked on more than 100 basis points to reach 12.5%, a commanding result compared to pretty much any other defense contractor you can name. Lockheed Martin (NYSE:LMT) comes closest at 12%; Raytheon (NYSE:RTN) and L-3 (NYSE:LLL) aren't far behind, around 11%. Northrop Grumman (NYSE:NOC) and Boeing (NYSE:BA) remain stuck in the single digits. That's a stupendous performance for GD, but trust me -- you ain't seen the half of it.

The future's so bright...
According to yesterday's news, General D shows no signs of losing momentum in 2009. To the contrary, with sales up just 8% last year, backlog -- industry parlance for future sales -- grew more than 22%. Far from slowing down in its first year under the Obama Administration, General Dynamics seems likely to accelerate its outperformance.

Best of all, to this Fool's eye, is the quality of General Dynamics' earnings. Free cash flow of $2.6 billion in 2008 more than equaled the "net earnings" calculated under GAAP.

Foolish takeaway
Skittish investors may worry that with long-term growth posited at 9.4%, General Dynamics will prove anything but dynamic for their portfolios. But the General's single-digit price-to-free cash flow ratio, spotless balance sheet, and strong prospects for revenue growth all convince this Fool that these shares are just about bulletproof.

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Fool contributor Rich Smith owns shares of Boeing. The Motley Fool has a disclosure policy.