What happened Shares of AeroVironment (NASDAQ: AVAV) gained 32.1% in January, according to data provided by S&P Global Market Intelligence, with almost the entire gain coming during a single trading session. The drone maker made a move during the month to broaden its product portfolio, and investors applauded the action. AVAV data by YCharts So what AeroVironment is primarily a manufacturer of small drones for the military. On Jan. 13, the company announced plans to acquire privately held Arcturus UAV for $405 million in cash and stock in an effort to expand the products it offers to the government. Arcturus specializes in larger drones than the sometimes handheld models AeroVironment is known for. The target makes drones that fall into the under 55 pound and under 1,320-pound categories. AeroVironment in a statement said those categories represent about $1 billion in annual potential contracts. Image source: AeroVironment. "Together, we will offer an unmatched portfolio of multi-domain unmanned capabilities, supported by our ongoing investments in artificial intelligence and autonomy, to help our customers address a broad set of defense and commercial missions," AeroVironment CEO Wahid Nawabi said in a statement. The deal is valued at about 11 times Arcturus' adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). AeroVironment said it expects the purchase to contribute to earnings immediately. Now what Wall Street loves this deal. Baird analyst Peter Arment upgraded AeroVironment to outperform from neutral after the announcement, saying the purchase would give the company a "highly profitable unmanned aircraft system portfolio" and the ability to boost its growth rate. There's a lot to like, but there's also an argument to be made that after the dramatic jump in January the upside is now priced in. AeroVironment now trades at more than 60 times forward earnings, which is rich even if Arment is correct and the Arcturus deal does spark growth. I'd advise caution buying in right now. 10 stocks we like better than AeroVironmentWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and AeroVironment wasn't one of them! That's right -- they think these 10 stocks are even better buys. See the 10 stocks *Stock Advisor returns as of November 20, 2020 Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends AeroVironment. The Motley Fool has a disclosure policy.Source