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Fundamentals

Total revenue and earnings per share (EPS) have been increasing 38.9% and 19.8% respectively. Nile’s margins are 5.1% compared to Tiffany (TIF)'s of 10.1%. Nile hopes to attract more volume with lower prices for comparable quality. As for return on investment, Nile’s is 30.7% while Tif’s is 11.6%. This may be due to the fact that Nile does not hold gems in inventory until they have an order from an online customer who only sees a photo of the product. To compare Nile’s and Tif’s stock prices go to: http://finance.yahoo.com/charts#chart9:symbol=nile;range=6m;compare=tif

Nile’s Earnings will be announced on October 30. The mean of 13 analysts’ earnings estimates for Q3 is $.16 per share or $.07 less than Q2 when Blue Nile beat estimates by $.08. However, Q3 is normally the weakest quarter in the jewelry business. Q4 is the strongest of the year, why I am recommending this as a pre-holiday trade.

Nile had a Return on Equity (ROE) of 31.12% as of July 1, 2007. Tiffany’s ROE for the same period was 15.23%. Which is better? William O'Neil, publisher of Investor's Business Daily, found that winning stocks over the last 50 years had a ROE of 17% or more.

As for ownership, Nile's float, the total number of shares that the public can buy, is 135.36M shares. Analysts like to see 3-100M shares float because if a small number of shares floats, fewer shares have to be sold to push up the stock price. Institutional and mutual funds hold 111M shares or 91% of the Nile's float. There are only 12.18M for the non-institutional investors, impressive float statistics. The high percentage of institutional investors is also impressive.

At an EPS of $.87/share, for a stock that is trading at $100, the P/E or multiple is 115. This is quite high, but is eclipsed by other bullish indicators. Read on…