2-Star Stocks Poised to Plunge: Blue Nile?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, online jeweler Blue Nile (NAS: NILE) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Blue Nile's business and see what CAPS investors are saying about the stock right now.

Blue Nile facts

Headquarters (founded) Seattle (1999)
Market Cap $467.6 million
Industry Internet retail
Trailing-12-Month Revenue $348.0 million
Management Interim CEO Vijay Talwar (since 2011)
CFO David Binder (since 2011)
Return on Equity (average, past 3 years) 32.8%
Cash/Debt $89.4 million / $744,000
Competitors BIDZ.com
Signet Jewelers
Zale

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 23% of the 864 members who have rated Blue Nile believe the stock will underperform the S&P 500 going forward.

Just last week, one of those Fools, All-Star huddaman, succinctly summed up the bear case for our community:

- Diamond business has slowed recently, but that's just a short term problem.
- Blue Nile is struggling to grow and may cut prices to better compete ...
- Their advantage is their cool website and first mover advantage. So far, the stagnant growth in sales proves they haven't been able to execute well and take advantage of that. The cool factor of the website can be replicated for under [$1 million] cost.
- Finally the high P/E they have been awarded that would generally be acceptable is not acceptable here because of the earlier points.

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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Blue Nile. Motley Fool newsletter services have recommended creating a position in Blue Nile. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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