Regular readers of the Fool know that we generally recommend avoiding IPOs until the dust settles. Rather than speculate on the short-term volatility of a relatively unknown company, it's often better to watch from the sidelines as others get caught up in the frenzied hype surrounding the next can't-miss stock. If both the story and the numbers are truly compelling, wait for a modicum of sanity to reign in trading before jumping in with both feet. This dictum applies to all, be it the much-anticipated offering of Google or yesterday's standout, Blue Nile (NASDAQ:NILE).

The online jeweler was brought to the market yesterday by lead underwriter Merrill Lynch (NYSE:MER) and co-managers Bear Stearns (NYSE:BSC) and Thomas Weisel Partners. In first-day trading, the stock opened at $25 and advanced as much as 38% from the $20.50 initial offering price (which itself was well above the estimated pricing range of $17.50-$19.50) before finally closing at $28.40.

The release of 3.74 million shares to the public raised more than $76 million. Two million shares were issued by the company, with the rest being sold by existing stockholders. Most were venture capitalists, such as Paul Allen of Microsoft (NASDAQ:MSFT) fame, who held 84,000 shares.

Blue Nile's website is user-friendly and interactive. It gives shoppers the option to design and preview their own unique jewelry creations. More than 50,000 couples have purchased engagement rings from the company, which specializes in diamonds and boasts a certified inventory that is 30,000 strong.

Blue Nile really shines after the purchase as well, by arranging financing through MBNA (NYSE:KRB), insurance through the Chubb (NYSE:CB), and complimentary next-day shipping from FedEx (NYSE:FDX). Should things not work out as planned, a generous return policy is standard. Blue Nile's website has won numerous awards, including Time's "best website for business" and Forbes' "favorite online jeweler."

Blue Nile is not a fly-by-night dot-com without a penny of earnings. The company has been profitable since 2002 and earned $27 million last year on $128.9 million in revenues. There was continued strength in the first quarter this year, with sales and earnings climbing 43% and 12%, respectively.

Competition for the new company will be fierce, however, not only from traditional bricks-and-mortar chains, such as Zale (NYSE:ZLC) and Tiffany (NYSE:TIF), but also in the online realm from (NASDAQ:AMZN) and Motley Fool Hidden Gems pick RedEnvelope (NASDAQ:REDE). Still, at the right price, investors may want to take the stock out of the display case for a closer look.

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Diamonds may well be a girl's best friend, but Fool contributor Nathan Slaughter can't fully appreciate them while still paying for an engagement ring. He owns none of the companies mentioned.