If I've been quiet lately about developments in the U.S. military's MRAP program (and I have), I should probably apologize (and I do). The fact of the matter is, I'm still analyzing the events.

For example, take last week's announcement that Force Protection (Nasdaq: FRPT) won a contract to build 157 Cougar MRAPs for the British Ministry of Defense. At the price tag of $125 million, the news appears to support my argument that Force is not dead yet. When you combine the occasional nine-figure sales deal with a few eight-figure contracts to maintain existing MRAPs, it's easy to conclude that Force's current 0.45 price-to-sales ratio wildly undervalues the company.

After all, defense-contracting heavyweights like Textron (NYSE: TXT), Raytheon (NYSE: RTN), and Lockheed Martin (NYSE: LMT) are routinely priced at one times their annual sales or more. With Force stock priced at less than half that multiple, it seems an out-and-out bargain. Why, even discount-priced Northrop Grumman (NYSE: NOC) shares fetch nearly twice Force's multiple.

A few caveats
Of course, there are good reasons for investors to discount Force's shares -- the question is whether they've discounted the shares too much. Based on last week's 30%-plus spike in share price, Mr. Market answered that question with a resounding "Yes!" But do the shares still have room to rise?

In an attempt to answer that, I'm going to list the pros and cons regarding the company, and try to decide whether I still want to own Force's shares myself. (Yes, through thick and thin, I'm still holding). Follow along if you dare.

Bad news first

  • The validity of the P/S ratio discussed above was questioned last month, when Force revealed that much of its supposed revenue was actually just funneled through the company en route to General Dynamics (NYSE: GD), which actually built the vehicles. In short, "Force's" revenue is inflated, and cannot be used as the basis for a P/S ratio.
  • As a result, Force must figure out some more accurate numbers, and cannot file its 10-K report until it's finished.
  • That made Force's auditor quit ...
  • ... Prompting the filing of more than a dozen class action lawsuits against the company, alleging everything from the usual "materially false and misleading statements," to difficulties meeting contractual deadlines for production of MRAPs, to failure to fix the accounting problems described above.
  • Meanwhile, Force's CEO and CFO have both jumped ship. You could call this "good news," because the execs in question presided over Force's decline, but ... 
  • ... So did the new CEO, Michael Moody, previously Force's COO.
  • Did I mention that Mr. Moody's primary experience is in running insurance companies?
  • Management has sunk $20 million into building a plant to manufacture "Cheetah" armored vehicles -- a product for which it has yet to book a single order.
  • Finally, witness the multiple instances in which the Pentagon has given short shrift to Force's bids for new MRAP contracts.

This last point troubles me most of all -- that the Pentagon prefers to buy MRAPs from Navistar and BAE Systems, rather than Force. This, even though Navistar was delisted by the NYSE for its own accounting problems, and Navistar's MaxxPro vehicle is one of only a few MRAPs ever to have suffered a K.I.A. in Iraq. For its part, BAE is a foreign contractor, under investigation for alleged bribery in a competition for Saudi fighter jet contracts. Yet the Defense Department deems both these firms better choices than homegrown Force Protection, pioneer of the MRAP concept.

And now the good
Pretty grim so far, eh? But there's good news, too:

  • First off, Force has already found a new auditor: Grant Thornton. Switching from a relatively unknown auditor to a brand-name shop has to give investors a shot of confidence -- and hope that an audited 10-K filing might be forthcoming in our lifetimes.
  • The U.S. government may not be interested in buying Force's MRAPs, but foreign buyers are lining up to do so. The Italians placed a small MRAP order of their own two months ago, and the Brits ordered at least 174 MRAPs around the same time.
  • Meanwhile, back at the ranch, Force held a conference call last month in which management described potential contracts to "remanufacture" -- as in repair, refit, and upgrade -- existing MRAPs already built for the Marine Corps.

Foolish takeaway
So what's a simple Fool to make of this mess? For what it's worth, here's my take. With sales growth stalled, Force is no longer a "growth stock." With no faith in its own numbers, it cannot be called a "value stock," either. At this point, Force is a potential "turnaround play," but that's about it.

Personally, I plan to hold this stock until the end of the year. If Force can straighten out its accounting, and either land the Marine remanufacturing contracts or begin inking some deals for the Cheetah, I'll give the stock a chance. If not, I intend to sell and take the tax write-off. In short, Force gets two more quarters to prove its case. Tick tock.

Fool contributor Rich Smith does not own shares of any other company named above. The Motley Fool has a disclosure policy