Beauty is in the eye of the shareholder. I say that only because there are two ways to approach last night's fourth-quarter report out of high-end jewelry retailer Blue Nile (NASDAQ:NILE).

The J. Alfred Prufrock in the room would look at the company missing out in terms of top-line growth. Net sales inched 24% higher to hit $90.7 million. Analysts were looking for a 25% advance. The hopeless romantics would then counter that the company grew its profits by 21% -- earning $0.35 a share -- when Wall Street would have been content with a mere 7% bottom line improvement.

The Internet's leading retailer of engagement rings helped its own cause by aggressively buying back stock. The company has repurchased 13% of its outstanding shares over the past two years. There is no reason why that trend should stop. Blue Nile has $5.89 a share in cash, and that could go a long way toward reducing shares even more than the 16.7 million it now records as fully dilutes shares.

The company is upbeat about its future. It expects to earn $0.80 a share to $0.85 a share in 2007, and that includes $0.24 a share in stock-based compensation expenses. Net sales should clock in 15% to 19% higher.

There will be challenges. Discounters like Wal-Mart (NYSE:WMT) and Costco (NASDAQ:COST) have created ripples in the low-end engagement ring market. That has had a pronounced impact on industry markups, even though Blue Nile is holding up well in the high-end market.

The threat of upscale chains making a bigger dent online is perpetual, yet the company notes that those who have tried to make it work online haven't had a whole lot of success. Head out to the Tiffany (NYSE:TIF) site to seek out the perfect engagement ring, and the retailer will dazzle you with ring pictures but ultimately guide you to schedule an in-store consultation.

Thankfully, the future also offers its fair share of opportunities. For starters, a little more than 20% of its sales are coming from repeat customers. Sure, you don't want serial engagement ring buyers. Still, there have to be better ways to market to satisfied customers by pitching them jewelry anniversary gifts in the future.

There is also an unlikely catalyst for future growth with Yahoo! (NASDAQ:YHOO). For now, Google (NASDAQ:GOOG) has been the more effective source of generating leads for Blue Nile because Google's AdWords system rewards well-performing ads with lower bid prices. This is where Blue Nile's established brand in the engagement ring market makes it an easier sell for folks scouring the Web to find the ideal diamond ring online. They trust Blue Nile and click on the retailer's ads often. Yahoo! has been mimicking Google's move, so one would think that Yahoo! will now become an effective source for Blue Nile leads as well.

So who will win? Will the waves of opportunity come crashing in or will the market follow the pessimistic Prufrock deeper into the water until it drowns? With Valentine's Day around the corner, it's hard not to be a hopeless romantic when it comes to the stock market. Go Blue Nile!

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Blue Nile has also been recommended in the Rule Breakers newsletter service. Yahoo! and Costco are Motley Fool Stock Advisor selections. Wal-Mart is an active pick for Inside Value readers.

Longtime Fool contributor Rick Munarriz proposed to his eventual wife 17 years ago. There was no Internet around at the time. Then again, knowing him, if the situation were to arise today he would not have a problem turning to Blue Nile. He does not own shares in any of the companies mentioned in this story. Rick 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.