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Force Protection Blasts Ahead

Shares rocket on a big order.

Force Protection

(FRPT) - Get Freshpet Inc Report

has scored an important victory.

The defense contractor this week landed a $490 million deal to supply the U.S. military with 1,000 of its blast-resistant Cougar vehicles. The order ranks as the largest one so far placed under the multibillion-dollar Mine-Resistant Ambush-Protected vehicle program.

Force Protection will work with giant

General Dynamics

(GD) - Get General Dynamics Corporation Report

, through a joint venture known as Force Dynamics, to supply the vehicles over the course of the next year.

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"We are pleased to note," said Chief Operating Officer Raymond Pollard, "that among several competitors -- and on Capitol Hill -- Force Protection's Cougar and Force Dynamics' accelerated delivery schedule are recognized as the necessary combination to produce vehicles that will immediately support ground missions and save lives."

Shares of Force Protection rocketed 8.4% to $24 on the news.

Bulls applauded. Thomas Weisel analyst David Gremmels said the new order increases his confidence in his delivery estimates for the company and now supports his production targets as well. Indeed, Gremmels now sees potential upside to his full-year profit estimates for the company.

But "we are leaving our estimates unchanged," he cautioned on Monday, "due to the lack of visibility into both the timing and recipients of the next round of awards, as well as execution risk as the team ramps up production."

Wall Street experts have long assumed that Force Protection would capture most of the MRAP orders. But critics have some doubts. Notably, they say that competitors have started copying the V-shape hulls that make Force Protection's Cougars fare so well. Moreover, they feel that Force Protection looks overvalued even if it lands bigger MRAP orders than most.

Even Gremmels has forecasted some weak metrics for the company. For example, he sees the company posting a drop in net margins -- and ongoing negative cash flow -- for the current year.

Given the company's growth outlook, however, Gremmels sees reason to buy the stock. His firm makes a market in the securities.

"Although bears will argue that MRAP-boosted 2008 earnings are unsustainable and should be discounted, we believe that the MRAP is likely to grow and that the company is well-positioned for ... future opportunities as well as being an acquisition candidate," Gremmels explained. Thus, "we are comfortable with a ... fair value of $26 to $29 a share."