"Today, AeroVironment mixes exciting experimental projects like those and practical, revenue-generating products derived from those heady efforts. Its business covers three areas: electric vehicle testing and charging systems, clean energy systems (primarily wind) and unmanned aircraft systems (UAS).

"Sales have grown 20% annually over the past ?ve years and should come in at $265 million for ?scal 2009, ending in April. The company consistently turns a pro t, with earnings per share expected to amount to $1.25 for 2009, up from $1 in 2008.

"Though it has idealistic beginnings, AeroVironment makes the bulk of its cash from a decidedly less bucolic business-the military. Fully 85% of AeroVironment's sales come from the U.S. federal government, stemming from the Pentagon.

"From those early experiments with alternative-powered and unmanned aircraft evolved a vital part of the U.S. Army's surveillance arsenal-small lightweight aircraft (think glori?ed model planes) that soldiers launch into the air by hand.

"These planes are used to conduct local scouting missions in the city and the mountains, enabling platoons to see via remote camera the lay of the land and the location of potential enemies.

"The most popular of these, the Raven, is a 4.2-pound drone with a 4.5-foot wingspan that's guided by remote control. AeroVironment is in the midst of delivering its second-generation Raven, an order of 1,900 units, of which it has delivered about 45%.

"AeroVironment is now developing the Global Observer, an unmanned aircraft that can stay aloft for much longer-as long as a week with its liquid hydrogen powered engine at an altitude of 65,000 feet. It will be used for surveillance as well as a means of relaying communications in remote areas.

"It appears that the company has a lock on the UAS business with the U.S. military-it has won all four known projects for such aircraft put up for bid by the Pentagon.

"These craft will eventually ?nd their way into civilian use, too. The Global Observer, for instance, is expected to be used for hurricane tracking and storm system monitoring once the Federal Aviation Administration creates rules for allowing unmanned craft in U.S. airspace.

"Profits from the military work are enabling the company to forge ahead with its clean energy efforts- management sees clean energy as a long-term business and is investing strongly in the sector.

"And even though it generates a minority of revenues (the other 15% of sales), it is highly pro?table, with margins now consistently coming in at 50% on its various non-military offerings.

"AeroVironment is making big strides in 'urban' wind turbines, systems small and safe enough to be utilized in densely populated areas.

"These turbines are small, about six feet high, designed with shields to spare birds from the slice of the blades and with an eye toward being architecturally appealing. The turbines are seeing interest from airports, which are under pressure to lower their carbon footprint.

"Boston's Logan Airport installed 20 of the turbines last summer with the expectation that they can generate 3% of the energy needs of the terminals. The turbines, also installed at the Brooklyn Navy Yard (not a military facility), fetch $6,500 each and are said to be in very high demand from building owners looking to reduce costs.

"Perhaps most exciting is AeroVironment's systems for testing and charging electric vehicles. The company makes a system called PosiCharge, basically a fuel pump to recharge an electric battery.

"Since electric systems are making inroads into industrial uses, such as forklifts, PosiCharge is ?nding early acceptance there. And with the U.S. government now starting to discuss incentives for electric car infrastructure, there is potential for business to get very interesting this year.

"Financially, AeroVironment is in excellent shape. It's free of debt with $120 million in cash on hand and its main client-the U.S. government-is the most reliable payer around. Meanwhile, the shares have been strong performers, rising from 25 to 35 in 2008. There was some volatility, but the shares are trending upward, rising over the 50-day and 200-day moving averages."

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.