Once upon a time, a tiny defense upstart by the name of Force Protection (Nasdaq: FRPT) took the investing world by storm, hawking a ballyhooed "Cheetah" light armored car in Congress, and stealing a march on larger rivals like BAE Systems, General Dynamics (NYSE: GD), and Textron (NYSE: TXT) in the race to build "mine-resistant, ambush-protected" vehicles for use in Iraq.

But after several design losses, and with the Iraq War winding down and American commitment to keeping troops even in Afghanistan questionable, defense investors may wonder: Will Force be forced out of the defense business? When charting a stock's future, it often helps to conduct a dispassionate analysis of the company's strengths, weaknesses, opportunities, and threats -- the so-called "SWOT" criteria. That's what we aim to do with Force today.


  • Force's key strength as an investment today has to be its valuation. Selling for just 0.33 times sales, the stock carries a huge discount from the 1-times-sales valuation similar defense contractors often command. General Dynamics and Boeing (NYSE: BA) both cost more than twice as much under this metric, while Lockheed Martin (NYSE: LMT) and Textron carry valuations nearly twice as high as Force's.
  • Business-wise, the biggest weapon in Force's arsenal is the huge "installed base" of Force-built MRAPs in the field. As the company evolves from selling MRAPs to designing whatever new vehicle the Army needs to defeat future challenges, Force's strong recurring revenues from servicing and repairing the trucks it's already built will cushion the transition.


  • Which is not to say the transition will be easy. Force's free cash flow has fallen off a cliff this year, with trailing FCF now down to just $14.1 million. That's better than the company did when it was building MRAPs "full speed ahead, and worry about collecting bills later." But it's a far cry from what the company accomplished in 2008-2009.
  • Probably the company's biggest weakness, though, is the lack of a clear reason to exist. If the Iraq and Afghanistan conflicts go away, and the Pentagon hunkers down on spending, who's going to buy all those armor-plated trucks Force used to build?


  • Foreigners, hopefully. As the U.S. cuts back on spending, Force is hoping to replenish its revenue stream by bidding to fulfill our allies' armored vehicle needs. Investors today have fingers crossed that Force's Ocelot can win one or both of two competitions in which it's running, the U.K.'s Light Protected Patrol Vehicle contract, and Australia's Protected Mobility Vehicle -- Light contest.
  • And Uncle Sam still comes through for Force every once in a while, too. In May, for example, the Army Tank-Automotive and Armaments Command placed a mammoth order for 60 Buffalo mine-clearing MRAPs -- $62.4 million in revenues in one fell swoop.


  • Maintaining its position in a field dominated by hungry rivals (on a starvation diet) is going to be a neat trick for Force, however. And probably the worst threat the company faces is that, in the event it lucks out and against all odds wins a big contract -- it may struggle to fulfill it, and leave money on the table. That's what happened with MRAP, as you may recall. Unable to meet Pentagon demands for volume production, Force had to get in bed with General Dynamics, and left a lot of cash on the table.
  • And even that didn't save Force when other rivals swooped in to eat its lunch. Navistar (NYSE: NAV), Oshkosh (NYSE: OSK) -- even General D itself. Time and again, companies with bigger manufacturing operations stole contracts out from under Force's proverbial nose, in a market that Force itself created.

Playing the role of insurgent mouse on a field trampled by elephants won't come easily to this maker of anti-IED armored vehicles. But if it's to survive, it's going to have to learn.

Fortunately, after two flush years of positive free cash flow, Force is strong-in-the-cashbox. And with free cash flow down, but still positive, that cash pile is in little danger of evaporating right away. With more than 40% its market cap comprised of cold, hard cash in the bank, and more coming in the door with each passing day, Force has the financial wherewithal to take some time and figure out what it wants to be when it grows up.

Or that's my take on the company's SWOT. But if you see blanks that need filling in, feel free to weigh in with a comment below.

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General Dynamics is a Motley Fool Inside Value pick, but Fool contributor Rich Smith does not own shares of any company named above. The Fool has a disclosure policy.