Domino's Pizza (NYSE:DPZ) stock was a favorite on Wall Street long before the pandemic struck. But returns have been supercharged following COVID-19 and the disruption it caused to the restaurant industry. Shares of the pizza delivery leader have trounced the market so far in 2020, right along with its peer Papa John's (NASDAQ:PZZA).

That rivalry will feature prominently when Domino's announces its latest earnings results on Thursday, Oct. 8, because Papa John's appears to be winning back market share. Investors will be watching for those sales updates, and any signs of the chain's improving financial strength, in this week's report.

Let's take a closer look.

A delivered pizza being shared.

Image source: Getty Images.

It's a new world

Domino's has been on an impressive winning streak, having expanded its share of the pizza delivery niche by a full 15 percentage points in the past decade. By late 2019, it counted 35% of the massive U.S. market, plus roughly 16% of all carryout pizza orders.

But the pandemic may be helping to slow that dynamic thanks to a surge of restaurant and fast-food chains entering the home delivery space. Papa John's has also announced robust sales growth in recent months, with revenue spiking by over 20% in July.

Domino's report will give investors a chance to judge its sales gains against that metric, and against the chain's own 16% increase in the fiscal second quarter. Shareholders might be disappointed if sales gains didn't hold up compared to these elevated figures.

Yellow flags

The chain's last quarterly check-in contained a few areas of potential concern for investors that they'll want to see progress on in Thursday's update. Domino's international business hardly expanded last quarter, with its 1.3% uptick just barely protecting its streak of over 100 quarters of growth in that segment.

The fast-food specialist should also announce improving cash flow. That metric landed at $212 million over the first half of the year, which isn't much better than the $202 million Domino's reported a year earlier. Its accelerating sales growth ideally will produce more resources that management can direct toward growth initiatives and toward paying off its over $4 billion of debt.

Looking out to 2021

Even assuming Domino's didn't lose market share this quarter, investors will be wondering how CEO Ritch Allison and his team are planning to protect that advantage during the disruptive months ahead. The good news is that the chain has one of the most cost-efficient -- and e-commerce driven -- operating models around. Those assets should serve it well through even a deep and prolonged downturn in the restaurant industry.

The flip side of that coin is that Domino's has the most to lose as rivals like Papa John's target bigger footholds. In recent years, the chain has used a mixture of aggressive store expansion, tech innovation, and value menu pricing to keep customers loyal by driving order times down even as quality improved.

That approach should continue paying dividends in 2021 and beyond, assuming the pandemic hasn't fundamentally changed much about the pizza leader's appeal in comparison to other fast-food giants.