Tiffany & Co. (TIF), Blue Nile Inc (NILE), Signet Jewelers Ltd. (SIG): Does the Blue Box Still Have Room to Run?

Tiffany is no stranger to grandiose gestures (you know this if you’ve been in its 5th Ave store), but it is now planning to open a flagship Paris store during fiscal 2014. This 10,000 square-foot store is expected to be a material revenue generator on the back of a rebounding European economy.

Will you marry me?

One-half of the jewelry industry’s sales are diamonds; as a result, it’s no surprise that the marriage rate plays a big role in industry growth. The engagement-ring segment is also still the largest revenue driver for Tiffany.

While the marriage rate has been in decline year-over-year since 2008, marriage rates in mature markets were actually up in 2012. What’s more is that Asia is expected to see some of the best growth in the world over the next couple of years, and, as aforementioned, Asia will be one of Tiffany’s key focuses going forward.

As the economy and credit markets loosen up, so should consumers’ purse strings. I see the top-end jeweler, Tiffany, only growing stronger as the number of high-income earners return to pre-crisis levels. IBISWorld believes that the number of households earning more than $100,000 will grow slightly in 2013, which is a big positive for the likes of Tiffany .

Bottom line

In short, Signet is the cheapest jeweler and Blue Nile Inc (NASDAQ:NILE) the most expensive , with Tiffany in the middle; Signet trades at 13 times forward earnings , Tiffany at 20 times and Blue Nile Inc (NASDAQ:NILE) 35 times . While the valuation appears somewhat unappealing for Tiffany’s, the company still offers a 1.6% dividend yield and is a long-term growth play. Analysts expect the company to grow EPS at an annualized 12% over the next five years .

The future of the jewelry industry will continue to show strong growth, as there’s a good chance consumers will not turn to the likes of Wal-Mart and Target to make key purchases. I’d be a buyer of Tiffany at current levels, given its exposure to the high-market, but Blue Nile Inc (NASDAQ:NILE) is a bit expensive and Signet is focused on the middle market, which is more tied to the economy. I’m holding off on both Blue Nile and Signet.

The article Does the Blue Box Still Have Room to Run? originally appeared on Fool.com and is written by Marshall Hargrave.

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool recommends Blue Nile. 

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.