coitus

Blue Nile: A Classic Underpromise, Overdeliver Company

You deserve congratulations for owning the stock from $35 to $60 - beyond that you've been lucky and I think you'll be biding time. "Being the leading online jewelry retailer" has no implicit value unless the business model and profitability justifies the valuation. You've been right about your ZLC trade but keep in mind that the "leading retailer of jewerly in the US and Canada" also known as Zales has a market cap of $965 mm - that math doesn't seem to support your $2-5 bn market value for NILE.

Blue Nile: A Classic Underpromise, Overdeliver Company

but if they are really taking so much share then why are orders only growing 15%? Wouldn't they be growing far faster given what a small piece of the overall pie NILE represents?

My other point is this, if the company can grow earnings 25% per year, what multiple do you assume the company will trade on 2010 earnings? Assuming they earn $1.05 in '07 and grow 25% per year then 2010 earnings will be $2.05. Let's assume they slow down to 20% growth after that. At a 1.5x PEG, the mutliple would be 30x. 30x $2.05 in earnings, you have a $61 stock. Congratulations, you've managed to lose $20 per share off of today's close over the next 3 years. To justify this multiple, you need to have hyper growth - 15% growth in orders isn't hyper growth.