I'm not sure what Mr. Market wants from Ceradyne (NASDAQ:CRDN). Revenue growth? Check. 67.6%. Earnings growth? Check. 76.7%. Good guidance? Double check. On the conference call today, CEO Joel Moskowitz said that the company now expects full-year earnings to come in between $1.79 and $1.83 per share. The original range was $1.65 to $1.75. He also expects $2.43 to $2.52 for 2006, which would represent another 37% growth.

But that's the way it goes with this company. In the past, Ceradyne shares have swung 15% during the conference call, and today they dropped that much right out of the gate. But where today's flippers see red, patient investors should see opportunity.

Ceradyne's margins continue to improve, and that despite higher energy costs. Gross margins improved 3.5% even when you disregard the charges that artificially depressed them during the year-ago period.

Best of all, that forward guidance assumes little positive impact from important new market opportunities, if any at all. Based on the "big army" alone, the market for body armor plates will be strong for at least two years. And Ceradyne is seeing increasing opportunities from the Air Force and Marines. Vehicle armor is just getting started: The firm recently displayed an armored commercial vehicle built on a Ford (NYSE:F) chassis.

But unlike so-called peers Armor Holdings (NYSE:AH) and DHB Industries (AMEX:DHB), Ceradyne is more than a defense company. The firm does almost 40% of its business outside the defense world and sees great potential in some of its many new products, such as diesel fuel pumps, oil drilling components, and even ceramic medical parts, such as high-tech bits, which could replace portions of our spines.

That's why I still think Ceradyne is cheap, despite what the trailing P/E looks like on the news services. It currently trades at less than 21 times the mid-range of the fiscal 2005 guidance, which represents 60% EPS growth. It trades at 15 times the mid-range of 2006 guidance, which bakes in another 37% growth.

This stock isn't for the weak-kneed, but for those who know what the firm is doing and where its potential could be, drops like today's are good news. I took about all I could get when the stock tanked earlier in the year, when Wall Street's Brainiacs sent shares spiraling for the sin of unavoidable, temporary timing shifts. (When Uncle Sam is giving the orders, you do have to march to his tune.) Of course, that non-crisis quickly passed. Those shares have since doubled, and I doubt that was my last chance to make money here, and I don't think it's too late for anyone else to, either. Keep your eye on this business, not on the ticker tape.

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At the time of publication, Seth Jayson had shares of Ceradyne, but no positions in any other company mentioned. View his stock holdings and Fool profile here. Fool rules are here.