Why did AeroVironment stock soar in March?

AeroVironmentfirms(NASDAQ resonance code: AVAV)Investors have seen their confidence in the drone maker reciprocated and see a lot of potential ahead. According to data from S&P Global Market Intelligence, AeroVironment's share price soared 20.9% in March, hitting an all-time high after the company reported a strong quarter and raised its full-year guidance.

Turning Potential into Profit

AeroVironment produces unmanned aerial vehicles (UAVs) for the U.S. military and other customers. This area has been a focus for military buyers for years, but the real value of these platforms was demonstrated in the Ukraine incident, which helped accelerate the stockpiling of UAVs by the Pentagon and its allies.

As a result, sales are surging. In March, AeroVironment announced fiscal third quarter earnings per share that nearly doubled Wall Street's consensus estimate, with revenues up 39% year-over-year. net cash from operations increased to $26.9 million in the period ended Jan. 27, up from $8.6 million in the same period last year. At the end of the quarter, AeroVironment also secured $462.8 million in future business backlog, giving investors some insight into what to expect in the coming quarters.

The company also raised its full-year revenue guidance for the second consecutive quarter. Management now expects full-year revenue to be in the range of $700 million to $710 million, up from September's forecast of $645 million to $675 million.

Is AeroVironment stock worth buying after hitting all-time highs?

AeroVironment has been one of the few high-risk/high-report stocks in the defense sector for many years. Over the past year, we've seen the company's sales grow, which has driven the stock price higher.

We are still in the early stages of the drone revolution, and AeroVironment has already gained a foothold in providing small and medium-sized drone squares to military customers. However, the market is also very competitive, especially for larger defense platforms with higher profit margins.

AeroVironment is currently trading at over 50 times expected earnings, so it's safe to say that the expected future growth is already factored into the stock price. The company has been a high-cap stock for some time, but the valuation following the earnings announcement is significantly higher than it has been for most of the past few years.

Investors holding the stock would do well to continue to hold it and let the story continue to unfold. But for those who are interested in buying, I suggest patience. Historically, AeroVironment has been a volatile stock.

Investors who include AeroVironment in their portfolio now should expect turbulence in the stock. If history is any guide, there may be better opportunities to buy the stock in the coming months.

Should you invest $1,000 in AeroVironment now?

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Lou Whiteman does not own any of the shares listed above.The Motley Fool holds a recommendation for AeroVironment.The Motley Fool has a disclosure policy.

Why AeroVironment Stock Surges in March was originally published by The Motley Fool.