So you need to buy some diamond jewelry, but don't know anything about the market? That's all right. There's a place online that explains shape, cut, color, clarity, carat weight, certification and setting ... and then let's you design your piece right there on the site. It's the largest online diamond retailer in the world.

Blue Nile (NASDAQ: NILE) sells diamond, platinum, gold, pearl, and sterling silver jewelry on web sites based in the United States, the United Kingdom and Canada. Products include settings, wedding bands, earrings, necklaces, pendants, bracelets, and watches. The Blue Nile web sites showcase in-depth educational materials and online tools that place consumers in control of the jewelry shopping process. Prices are significantly below traditional retail. Tiffany (NYSE: TIF) is a major competitor.

The company pleased investors last week, when it reported Q2 EPS of 23 cents and revenues of $72.1 million. Analysts had been expecting 18 cents and $67.1 million. Management also guided Q3 EPS to 13-15 cents (13 cent consensus), Q3 revenues to $66-$67.5 million ($62.7M consensus), FY07 EPS to 94-99 cents (90 cent consensus) and FY07 revenues to $312-$318 million ($306M consensus). The news popped the shares out of a late-July/early August "cup" into the mid-August "handle" of a Cup & Handle formation. The price is now showing signs of completing the pattern with a bullish rise from the right-hand side of the "handle."

Brokers recommend the shares with three "strong buys," one "buy," eight "holds" and two "sells." Analysts see a 27% growth rate through the next year. The NILE Sales Growth rate (26.67%), EPS Growth rate (27.78%), Return on Assets (16.81%), Return on Investment (30.68%), Return on Equity (31.12%) and Revenue per Employee ($1.77M) compare favorably with industry, sector and S&P 500 averages. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $33.05 and $98.50. A stop-loss of $73.75 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.