Dave & Buster's (PLAY 2.91%) stock was an unlikely winner in early 2021 as investors bet on a dramatic post-pandemic growth rebound for the restaurant and entertainment chain. But the investor enthusiasm for the stock has waned in recent weeks. Shares are barely beating the broader stock market so far this year.

The company has a chance to improve on that weakening narrative in just a few days, including by predicting an imminent return to record sales levels. The updated outlook will be one of at least three key trends worth watching when it reports second-quarter earnings on Thursday, Sept. 9.

A young woman playing an amusement game.

Image source: Getty Images.

1. Is Dave & Buster's getting back to growth?

Dave & Buster's was still operating at a severely reduced capacity in the fiscal 2021 first quarter. Yes, sales jumped 66% compared to a year earlier, when COVID-19 shutdowns were near their peak. But the chain was still far below its 2019 volumes thanks to lingering pandemic pressures on indoor dining and entertainment.

CEO Brian Jenkins and his team painted a bright picture of the month-by-month recovery, though. By April, the final month of the quarter, comparable-store sales were down just 12% compared to 2019, he said in an earnings call. That metric had improved to a 4% decline by May.

The big question this week is whether Dave & Buster's continued climbing back toward its 2019 records. It might have even broken back into positive territory along with most national restaurant chains, including McDonald's and Starbucks.

2. Dave & Buster's has been cutting costs

Dave & Buster's lacks many of the financial advantages of these larger peers, which is one big reason management has been busy slashing costs to help raise its cash flow and earnings power.

Executives celebrated their progress on this score in June, with Jenkins saying, "Our lean operating model drove outstanding profit flow-through during the quarter." The chain had taken a big step toward positive annual earnings.

PLAY Operating Margin (TTM) Chart

PLAY Operating Margin (TTM) data by YCharts

It's relatively easy to goose profits in any single short-term period, for example by running with lower staffing levels. Yet Dave & Buster's is hoping it has hit on a more efficient selling model that can sustain it through any industry environment. The main metric to follow to judge its success here is operating margin, which last quarter was 14% of sales compared to 16% back in 2019.

3. Looking ahead

The stock's volatility this week might come down to the new outlook that Jenkins and his team issue for 2021. Back in early June, it seemed likely that sales gains would accelerate thanks to the proliferation of vaccines and pent-up demand for in-person entertainment.

Yet the weeks that followed brought another surge in COVID-19 outbreaks that likely pressured customer traffic. We'll find out on Thursday whether that resurgence means investors will now have to wait until 2022 before Dave & Buster's starts setting sales records again.

In that case, its earnings picture will be cloudy, too. The "dramatic turnaround in profitability" that management highlighted last quarter wouldn't be possible without a similarly strong demand spike that carries through the second half of 2021. Most investors will be laser-focused on that updated outlook on Thursday.