A lot of companies that looked like no-brainers earlier this year are starting to look a lot more like head-scratchers.

Esterline Technologies (NYSE:ESL) is a great example. Back in March, the specialty manufacturer of aerospace and defense equipment had some investors salivating over its ludicrously low valuations. Esterline makes everything from GPS systems to sensors for jet engines to combustible mortar casings -- and that's only the tip of the iceberg for mission-critical defense, military aerospace, and civilian avionics applications.

Then and now
On Thursday, the company beat Wall Street estimates for sales and profits for its fiscal fourth quarter. That showing was partly due to strong performance from its Canadian avionics operation, which benefited from its new military trainer cockpit as well as retrofits to the iconic Lockheed Martin-designed (NYSE:LMT) C-130 cargo plane.

Revenue came in at $394.7 million, which was 2.4% lower than a year ago, and earnings from continuing operations fell from $1.38 to $1.26 per share, even including a year-end tax benefit.

Navigating the fog
You may never have heard of Esterline, but its primary buyers should ring a bell: Boeing (NYSE:BA), Honeywell (NYSE:HON), and the U.S. Department of Defense are among its largest customers.

If you're not impressed by Esterline's clientele, you might still appreciate the value its shares offer. The company's stock trades at roughly 12 times its trailing 2009 full-year earnings from continuing operations. And analysts -- who've underestimated Esterline's results two quarters in a row now -- are predicting earnings growth of 13% for the company over the next five years.

Brass tacks
Management's guidance range of $3.20 to $3.45 per share for the next fiscal year gives the company a forward P/E range between 12 and 13. That's not nearly as attractive as its single-digit multiples from nine months ago, but it's still attractive for a company with a debt-to-equity ratio of less than 0.5 and nearly $6 in cash per share.

Still, if you think private spending will remain tight and public criticism of what some see as out-of-control government spending will be too difficult for lawmakers to ignore, then you probably expect lowered demand for Esterline's services from companies like Northrop Grumman (NYSE:NOC), Siemens (NYSE:SI), and General Electric (NYSE:GE). That could hurt the shares in the near future. But if you think the company's long-term prospects are good, that might well just be the second chance you've been waiting for. In other words, keep your powder dry.

Interested in the defense sector? Read more from Rich Smith and his six stocks that never surrender.