(FORTUNE Magazine) – Frank Sinatra sang that love is better the second time around, and Wall Street must believe it. The same sector that just a few years ago broke investors' hearts and helped devastate their portfolios once again has the market all aflutter. Yes, Internet stocks are back.

So far this year the S&P 500 has climbed a healthy 11% and the tech-heavy Nasdaq has spiked up 24%. But e-stocks have left the big indexes in the dust. The Dow Jones Internet Commerce index, for instance, is up 71%. The best-known dot-coms have blasted even higher, driven by demand for the scarce top-quality names. Yahoo and Amazon are each up more than 80% year-to-date.

Those marquee names aren't the only ones taking off. Some formerly trendy stocks have been experiencing oh-so-familiar surges. Remember Ask Jeeves? The search engine with the cartoon butler logo has served up a ritzy 494% gain this year. And InfoSpace, once described as a "piece of junk" by former Merrill Lynch analyst Henry Blodget, is up 179% over the past year.

Given the dot-carnage of the past few years, it's only natural that runs like those, when connected to companies associated with the Net, would leave investors pondering the dreaded B word: bubble. So are we seeing a repeat of the irrational exuberance of the late 1990s? Or is there more to these astonishing Net results?

There's no question that e-stocks have benefited from momentum trading and sector rotation. But analysts say that this time things are different. They point out that Internet use increased throughout the downturn and that online sales, while still only about 4% of all U.S. retail sales, have been growing steadily. Excluding auctions, online consumer sales in the first half of this year reached $42.4 billion, up from $24 billion in the first half of 2001, according to comScore Networks. Online advertising has also rebounded, particularly in the form of paid search listings. All that development has helped bring about the biggest change analysts and portfolio managers latch on to--the rate at which Internet companies are generating actual profits and free cash flow. "At least you can have a rational discussion about what they're really worth instead of 'price to click' and all sorts of other weird made-up metrics," says Kevin Landis, chief investment officer of Firsthand Funds. "They've got real earnings, and they've demonstrated they're not just some crazy, nutty idea." And without an equity market ready to be tapped for easy financing, companies have had to slash costs and focus more on their balance sheets.

That still doesn't mean the stocks are cheap. Investment-management house Bridgewater Associates of Westport, Conn., calculated in a recent note that the 20 top e-commerce companies have a combined market cap of $122 billion but only $25 mil-lion in earnings over the trailing 12 months. That leaves the companies with a stratospheric aggregate P/E of 4,878. "They're pricing in a lot of growth," says Shawn Milne, SoundView Technology analyst. "Fundamentals are good, but I think the easy money's gone." That means bargains are hard to find. Still, there could be money to be made. With that in mind, we went looking for growing e-stocks that trade at reasonable prices. We found three.

As the tech rally continues and investors feel more comfortable getting back in the market, online brokers such as Ameritrade and E*Trade should benefit. Of the two, Ameritrade (AMTD, $10) should have more upside in a stronger market, especially since, unlike E*Trade, it doesn't have banking and mortgage operations that could weigh on the share price if interest rates continue to tick higher. And the company has already seen an upswing in activity. Last quarter, revenue rose 88% as the average number of daily trades jumped 33%. That increased activity, combined with continued cost cutting, led to record quarterly profits of $49.9 million, up from $5.8 million a year ago. The company also has a pristine balance sheet and strong management that keeps a lid on costs. "They really have the lowest cost base in the business, which can drive much better operating-margin expansion," says Merrill Lynch analyst Colin Clark.

Another online play on offline trends is NetFlix (NFLX, $23). The Internet movie renter is taking advantage of the growth in DVD use to become the film buff's new best friend. The number of households with a DVD player surged to 39 million at the end of 2002, and NetFlix has found a sizable niche, passing one million paid subscribers earlier this year. Analysts see more opportunities ahead. "I can see the subscriber base growing to three million to four million in the next few years just because there is so much demand in the market," says Safa Rashtchy of US Bancorp Piper Jaffray. That subscriber growth helped the company last month record its first quarterly profit, and analysts surveyed by First Call are predicting that NetFlix could grow long-term earnings by as much as 50% a year. That makes the company's bubble-era 2003 P/E ratio of 73 much easier to stomach. It helps, too, that NetFlix is producing a generous amount of free cash flow, $1.66 per share last year. "You don't have to make heroic assumptions on the cash-flow growth picture for the next five years to get to a $30 price target," says analyst Rich Ingrassia of Roth Capital Partners. The biggest threats to that growth are competitors Wal-Mart and Blockbuster. But they haven't yet been able to waylay the upstart. In fact, there has been plenty of speculation about NetFlix as a potential acquisition target. "NetFlix has a pretty substantial head start," says Ingrassia, "not just in time but in the kind of loyalty, word of mouth, and brand that they've built up."

There's opportunity overseas as well. As remarkably as U.S. Internet stocks have performed this year, their gains have been dwarfed by those of some Chinese counterparts. China.com is up 373% over the past year, and Sohu.com has soared an astounding 2,360%. "Internet companies are hugely profitable in China," says Rashtchy. But in this speculative arena, NetEase.com (NTES, $42) may have the best prospects for shareholder return right now. The company, which sells online advertising, paid wireless services such as text messaging, and online gaming, recently announced that sales in the second quarter shot up 254% from a year earlier. Earnings for the period came in at $9.2 million, up from $4,600 a year ago. Analysts aren't counting on quite that kind of explosive growth going forward, but they do forecast a long-term growth rate of 40%. That means that, even with the stock up more than 2,400% off its 52-week low, NetEase.com has an attractive P/E-to-growth ratio of under one. "It remains pretty reasonably valued relative to the growth," says Michael Mahoney of investment house EGM Capital in San Francisco. And as Internet stocks race ahead, that's just the kind of factor investors will be hunting for.

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