Is Blue Nile (NASDAQ:NILE) getting a little bit more engaging, in the investing sense? Today, the online diamond purveyor finally seemed to get some of the love that many have thought it deserves, with the release of first-quarter numbers that hinted at the strengths of the company.

Blue Nile reported first-quarter net income up 36.6% to $2.6 million, or $0.14 per diluted share. Net sales increased a healthy 23.3% to $44.1 million. It sported cash and marketable securities of $80.6 million on its balance sheet and remained free of long-term debt. Blue Nile has also been conducting stock buybacks of late.

The company cited its diamond engagement-ring business and a strong Valentine's Day performance as contributors to these numbers. Citing a $4.5 billion market for engagement rings in the United States, the company hinted in its conference call at the potential for growth. Blue Nile said it still has only 2.9% of that market.

However, in domestic online sales, it has more than 40% of the current market. One of the reasons this stock can be considered a Rule Breaker is that as more people are migrating to high-speed Internet connections, most of those people are only slowly becoming accustomed to buying certain goods, like high-end jewelry, online. "For this reason," Blue Nile head Mark Vadon said in the conference call, "we believe we are still early in the growth curve of our category."

Further, the company currently sees hefty growth in the non-engagement category, with its trademark customization helping to boost that area as well. The company's also targeting expansion into Canada and the UK.

Of course, Blue Nile does face some stiff competition. Perhaps the most formidable is bricks-and-mortar upscale diamond purveyor Tiffany (NYSE:TIF), which, with its killer brand and signature blue box, definitely evokes a strong emotional response in many women, particularly brides-to-be. Meanwhile, fellow Rule (NASDAQ:OSTK) and Motley Fool Stock Advisor pick (NASDAQ:AMZN) both provide the ability to customize jewelry over the Internet, although Blue Nile professes to be targeting a more upscale customer.

The quarter probably gives the Blue Nile bears something to think about. The stock may sound pricey to some, what with its forward P/E of 30. However, given the company's admittance that it likes to maintain a conservative outlook, the fact that it boasts a lot of cash and no debt, and that it has a prime position in a growing subset of Internet shopping that hasn't yet been fully tapped, there's an argument that this stock is still an underappreciated diamond in the rough.

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Alyce Lomax does not own shares of any of the companies mentioned.