Um, duh ...
Oh, I know the call may seem late to some. NVIDIA shares have outperformed the market handily over the past year. They've more than doubled off their lows of last November. But Fools, that was speculation on the prospects of a recovery. What I'm saying now is that the recovery has become fact.
Three months ago, I went out on a limb and suggested that "the company's turned the corner and is about to make a big run." Why? Mainly, because NVIDIA did a great job liquidating old inventory, with the result that it had turned just barely free cash flow positive for the last 12 months. And yet I admitted to being stumped by NVIDIA's transition from "losing lotsa loot" to "barely in the black." It's hard to value a company based on its free cash flow when it only has a little.
Fortunately, that task just got a whole lot easier.
NVIDIA boots up
Yesterday, NVIDIA deftly transformed last quarter's turnaround into a bona fide trend, following in the footsteps of bull marketeers Intel
As a result, NVIDIA's cash generation more than quadrupled to $117.5 million for the quarter. Year to date, NVIDIA has generated some $238.9 million in hard cash profits. If it can maintain this pace, the company is on track to generate about $478 million for the year (yielding a hypothetical enterprise value-to-free cash flow ratio of just over 12).
And that's just the start, because it's starting to look like NVIDIA isn't just "maintaining" its growth pace, but accelerating. While not everyone is benefiting from the tech rally yet (I'm talking to you, AMD
If and when that prediction proves correct, we could see estimates for NVIDIA's growth (currently pegged at 10.6%) rise in a hurry. And if that happens, the share price should follow.