Army, Navy, and e-Force (the "e" is for "battlefield electronics") defense contractor General Dynamics (NYSE:GD) reported strong earnings for fiscal 2004 last week. (That's not terribly surprising. After all, there is a war going on.) In 2004, General D. boosted sales by 17% to well over $19 billion and increased earnings per diluted share by 22%, generating profits worth $6.09 per share for its owners.

Nonetheless, all the talk of defense spending cuts proposed by those peaceniks at the Pentagon has taken its toll on General D's stock over the past few weeks, knocking it down about 4% since the beginning of the year, and another percent or so on Friday. Mr. Market seems to be expressing his strong opinion that peace will soon break out -- if only because we can no longer afford to keep fighting wars -- and at that point, General D's profits will tank (pardon the pun.)

Moreover, if you look closely at the results, you'll see that the company's growth in GAAP earnings did not translate into much free cash flow (FCF) growth at all. Last year, General D. generated $1.5 billion worth of the green stuff. This year, it was just $1.54 billion -- an increase hardly distinguishable from a rounding error.

On the other hand, the company does trade at a fairly modest price, which may make its mediocre FCF improvement a bit more palatable for investors with a value bent. Currently priced at an enterprise value (EV) of $23.9 billion, General D. sports an EV/FCF ratio of just 15.5. Is that cheap enough to make it a buy? Perhaps, but hold on a sec -- there are even better values out there.

Lockheed Martin (NYSE:LMT), for one, has an EV/FCF of 13.3 based on its just-released 2004 earnings. Raytheon (NYSE:RTN) hasn't reported its end-year results yet, but based on its trailing 12 months (TTM) numbers, it's selling for an EV/FCF of just 13.8. Same for Northrop Grumman (NYSE:NOC), whose TTM numbers give it an EV/FCF of 13.5. And then there's the cheapest of the bunch, Boeing (NYSE:BA), scraping the tarmac with a ratio of around 7.5.

As a group, the big defense contractors look pretty reasonably priced if, for whatever reason, the cost-cutting rumblings from Washington prove unfounded. But really, how often does the government spend more than it says it will?

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Fool contributor Rich Smith has no ownership interest in any of the companies mentioned in this article, though he thinks their products are way cool. The Fool has a disclosure policy .