NVIDIA (NASDAQ:NVDA) "beat earnings" yesterday; its stock is up 5% already this morning. And I'm here to tell you that's exactly the right reaction. It's finally time to buy NVIDIA.

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 (NASDAQ:INTC) and IBM (NYSE:IBM) last month. As sales continued to falter (down 13% year over year), NVIDIA managed the neat trick of liquidating inventories even faster. Total inventories by quarter-end stood 35% lower than one year ago.

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 (NYSE:AMD) -- and unless you've got something magical up your sleeve on Aug. 27, you too, Dell (NASDAQ:DELL)), the release of new operating systems from Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) could release pent-up demand among PC shoppers. And that will benefit every PC parts maker in the land, NVIDIA included.

Foolish takeaway
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.

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Fool contributor Rich Smith does not own shares of any company named above, but Apple and NVIDIA are Motley Fool Stock Advisor picks. Dell, Intel, and Microsoft are Motley Fool Inside Value selections.

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