Blue Nile's (NASDAQ:NILE) latest quarter isn't as shiny as one of its diamond engagement rings, but it just may be enough to get potential investors to say "I do."

The high-end online jeweler notched $69.9 million in net sales during the second quarter, 5% below last year's showing. The results aren't all that inspiring, until you consider that Blue Nile posted double-digit percentage declines on the top line during its two previous quarters.

Gross and operating margins improved, though net income ultimately slipped 11% to $2.8 million, or $0.19 a share.

I was skeptical three months ago, when Blue Nile projected a return to year-over-year growth by the fourth quarter. However, the company appears to be on track. CFO Marc Stolzman sees the current quarter clocking in "flat to slightly down," improving on the trend.

Sure, net sales fell by a sharp 23% during last year's fourth quarter. That's a healthy sandbag to face off against during the holidays.

As you can imagine, the recession has been cruel to the luxury jewelry market. If Blue Nile winces, real-world merchants Tiffany (NYSE:TIF), Zale (NYSE:ZLC), and global giant Signet (NYSE:SIG) are surely shrieking in agony. In contrast, the lower-end of the bling ring -- particularly Bidz.com (NASDAQ:BIDZ), Overstock.com (NASDAQ:OSTK), or even Amazon.com (NASDAQ:AMZN) -- stands a better chance in a downturn.

However, now that the economy is showing some signs of bottoming out, it's time to reconsider the high-end players.

This doesn't mean that Blue Nile is cheap. The stock has nearly tripled since bottoming out in January, leaping ahead of its own fundamentals. Blue Nile's guidance calls for earnings to clock in between $0.78 a share and $0.82 a share, so the stock is already priced at more than 60 times projected profitability.  

That's a bit rich, even if Blue Nile has always carried a valuation premium to the market.

Other Blue's clues:

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Blue Nile is a Motley Fool Rule Breakers recommendation. Amazon.com is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz wonders if gold bugs will get bitten over the apparent apathy for jewelry as a fashion accessory. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.