General Dynamics (NYSE:GD) emerged from the fog like an armored column this morning.

One year after a massive write-down at its information systems division caused General Dynamics to "miss earnings," the nation's largest maker of heavy armored vehicles for the military confirmed Wednesday that it's finally profitable again -- and in a big way. Fourth-quarter earnings from continuing operations, reported this morning, amounted to $1.76 per share on revenues of $8.1 billion -- ahead of estimates on both counts. Net profits for the quarter were $1.40 per share.

The company now has a full year of results not tainted by write-downs to examine; therefore, let's also take a look at them. For full-year 2013, General Dynamics:

  • earned $6.67 per diluted share, versus last year's loss
  • recorded $31.2 billion in revenues, down a fraction of a percent from last year
  • generated positive free cash flow from its business of $2.7 billion -- 13% more than it reported as "net profit," and a 19% improvement over last year's FCF number

Profit margin performance at the company is a bit difficult to characterize, set up as it is against a year in which the information systems' write-down so completely derailed the company's results. That being said, information systems did turn profitable again this year (7.7% operating margin), helping the company as a whole to achieve a respectable 11.8% operating profit margin. For context, Textron (NYSE:TXT), another armored-vehicle maker with which the General competes, and which also reported earnings today, achieved an overall operating profit margin of 5.6% -- less than half as good as General Dynamic's number.

Two of General Dynamics three other major divisions, aerospace and combat systems, saw profit margin improvement -- by 500 basis points and 650 basis points, respectively, to 17.4% and 14.8%. Of General Dynamics' four main divisions, only the marine one saw a decline in profitability, falling 150 basis points from 11.4% operating profit margin to 9.9%.

What it means to you
Does all of this add up to a "buy thesis" for General Dynamics? Sadly, no. Valued on its earnings -- earnings no longer weighed down, or excused, by a single-quarter's write-down -- General Dynamics sells for 14.1 times earnings today. Based on the company's projected long-term-earnings-growth rate under 7%, that's too expensive.

Valued on free cash flow, the picture's a bit brighter, with a price to free cash flow ratio of just 12.3. But earnings growth in the middle- to upper-single digits isn't good enough to justify that price, either. Long story short, while General Dynamics is looking a whole lot healthier today than it was a year ago, the 33% rise in stock price it's enjoyed over the past 12 months has already "baked in" the improvements. Absent faster growth, or a lower stock price, this one's no buy.