At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we'll be tracking the long-term performance of Wall Street's best and brightest -- and worst and sorriest, too.

And speaking of the best...
In the midst of a gloomy market, Motley Fool Rule Breakers recommendation Blue Nile (NASDAQ:NILE) sparkled this morning, buoyed by news that the stock jocks at Stifel Nicolaus had taken a shine to it. Citing a string of my favorite valuation metrics -- operating cash flow, capital expenditures, and free cash flow -- Stifel argues that Blue Nile looks "reasonably valued" based on its expected 2009 earnings. Stifel also likes the firm's low cost structure, its negative (in a good way) cash conversion cycle, and its continuing share buybacks, and it rates the stock a "buy."

Let's go to the tape
I admit, a blessing from Stifel can sometimes feel like a curse. While the analyst has a respectable 85.24 CAPS rating overall, when it comes to picking winners, Stifel is wrong more often than it's right. At last report, its accuracy percentage was a mere 49.89%.

Yet when Stifel is right, the gains can be enormous:

Company

Stifel Said:

CAPS Says (out of 5):

Stifel's Pick Beating S&P by:

Coca-Cola (NYSE:KO)

Outperform

****

27 points

CONSOL Energy  (NYSE:CNX)

Outperform

***

122 points

National Oilwell Varco (NYSE:NOV)

Outperform

*****

138 points

On the other hand, check out a few of Stifel's losers, each of which is more in Blue Nile's bailiwick:

Company

Stifel Said:

CAPS Says (out of 5):

Stifel's Pick Losing to S&P by:

Tiffany (NYSE:TIF)

Outperform

***

8 points

Amazon.com (NASDAQ:AMZN)

Outperform

**

11 points

Coach (NYSE:COH)

Outperform

***

32 points

Ugh. So basically, we're looking at an analyst with a so-so record for accuracy. One that performs particularly poorly when picking luxury and retail stocks. You're telling me these are the guys we should heed when deciding whether to buy Blue Nile?

Actually, yes
Stifel's record may underwhelm, but on this particular pick, I happen to think the analyst is right on the money. You see, while Blue Nile's 43 trailing P/E ratio may not look like much of a bargain, if you dig a little deeper into the company, you'll find a real gem of a cash-profits producer here. According to its cash flow statement, Blue Nile generated nearly $37 million in free cash flow over the last 12 months -- more than twice its reported net income.

The way I look at it, this means the stock is trading for a mere 19 times its cash profits, yet it's projected to grow at more than 22% per year over the next half-decade. This company isn't just "reasonably valued," as Stifel puts it. At today's price, Blue Nile's a steal.