Tic-tac-toe, investors want to know: After beating Wall Street earnings estimates in each of the last two fiscal quarters, will shares of rocket maker Orbital Sciences (NYSE: ORB) ignite once more this week? The Motley Fool Rule Breakers recommendation reports its fiscal 2007 earnings results on Thursday morning.

What analysts say:

  • Buy, sell, or waffle? Eight analysts keep Orbital on their radar. Buy ratings outnumber holds 7 to 1.
  • Revenue. On average, they're looking for quarterly sales to rocket 25% to $270.6 million.
  • Earnings. A doubling of profits to $0.24 per share is predicted.

What management says:
In addition to posting "strong revenue growth in all three of our business segments" and "boosted profit in most product lines," Orbital produced something of a "solid free cash flow in the third quarter."

What management does:
What's rare in general, though, is just par for the course at Orbital. This company hasn't "burned cash" since 2002, and over the past 12 months, it actually generated $46.5 million worth of free cash flow. Its GAAP numbers don't look half bad, either. Gross margins may be slipping, but thanks to restrained spending on operating costs, that slippage hasn't hurt operating margins much at all.

That said, in the operating margins race, the company continues to lag larger aerospace operators such as Raytheon (NYSE: RTN), Lockheed (NYSE: LMT), Northrop (NYSE: NOC), and Boeing (NYSE: BA) -- in that order.

Margins

6/06

9/06

12/06

3/07

6/07

9/07

Gross

18.8%

18.9%

19.7%

19.1%

18.4%

17.7%

Operating

7.8%

7.8%

8.5%

8.3%

8.1%

8.2%

Net

4.4%

4.4%

4.3%

4.5%

4.5%

4.8%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Writing in the October 2007 three-year anniversary review of all active Rule Breakers recommendations, Fool co-founder David Gardner said this about Orbital: "With a firm order backlog of more than $2 billion, Orbital Sciences should build on its strong record of performance. There's still plenty of potential from this undervalued satellite and defense contractor."

I wish I could say I agree, but I don't. Selling for 31 times both its trailing free cash flow and its net profits, Orbital just doesn't appeal to me at the analysts' projected growth rate of 15%. Orbital also sells for higher P/E and P/S multiples than any of its more Earth-bound, but also more profitable, rivals named above.

Listen -- I love Star Trek as much as the next geek, but the last thing I want to do is send you sailing off to the "first star to the left and straight on til morning," without warning that you might not like what you find when you get there. To me, there's simply better value to be found here at home in the aerospace companies, than in aerospace firm Orbital.

Fool contributor Rich Smith does not own shares of any company named above. For a different perspective on Orbital Sciences, try Motley Fool Rule Breakers free for 30 days. The Motley Fool's disclosure policy sees all, shows all.