Despite all the talk of constriction in the credit markets, Wall Street's buyback binge continues. The latest adherent to the "Corporation, buy thyself" philosophy is defense contracting giant General Dynamics (NYSE:GD), which late last week announced that its board has authorized a 10-million-share repurchase authorization.

That amount may not sound like a lot -- but when each of your shares fetches $90 and change, those shares add up right quick. Put it all together, and at recent share prices, General D's buyback is pushing the billion-dollar mark. But can the General's wallet really finance removing 2.5% of its share count from circulation? And even if it can, should it?

Can it pay?
No doubt. General Dynamics carries $2 billion in cash and cash equivalents on its balance sheet -- enough to pay for the authorized buyback tomorrow, if it wanted. Granted, the General's also got $2.8 billion in debt, but most of that is long-term debt, not immediately due and payable. What's more, if the last 12 months' results are any indication, there's plenty more cash where that came from. Over the last four reported quarters, General Dynamics has generated a whopping $2.2 billion in free cash flow. Even if its bank account were bone dry, management could effect this buyback over the course of several months' operations.

Should it pay?
I've got nothing against General Dynamics per se, but my answer has to be "No." However reasonably priced it may be, General D is no bargain at this price. Look how it stacks up against a few comparable defense contractors:

P/E

Price-to-Free Cash Flow

Projected Growth Rate

General Dynamics

20

17

11%

Lockheed Martin (NYSE:LMT)

16

14

12%

Northrop Grumman (NYSE:NOC)

16

15

13%

Raytheon (NYSE:RTN)

12

18

15%

Boeing (NYSE:BA)

17

8

16%

As you can see, whether you value it based on its earnings or its free cash flow, General Dynamics is the most expensive stock in this group with a PEG of 1.8.

Foolish takeaway
This battle isn't even close. With the highest P/E among its peers, and the lowest growth rate, the last thing General Dynamics should be doing is wasting money buying its own overpriced shares. Incidentally, that's the last thing you should be doing, too.

Fool contributor Rich Smith does not own shares of any company named above. Not even ultra-cheap Boeing. But if you are in the market for a great deal on a defense stock, make sure to claim your free trial of Motley Fool Rule Breakers, where we've scoped out three fast-growing defense plays for you. The Motley Fool has a disclosure policy.