Investors have some new reasons to love Domino's (DPZ 1.32%) stock again. The pizza delivery leader's share prices jumped this past week after the company reported improving sales and profitability trends, implying stabilization following a tough period of weakening results.

But is that enough of a reason to want to own this stock given all the competition in the fast-food space? Let's take a look at why investors might want to keep Domino's on their watchlist -- but not in their portfolio -- right now.

Domino's is getting back to growth

Domino's posted a modest 2% increase in global same-store sales for the period that ended in late September, but that result was still an encouraging sign for the business. Sales had fallen for two consecutive quarters in the core U.S. market, marking a downturn that hasn't happened in over a decade.

Domino's appears to be back on a solid growth footing now, though, after sales soared in earlier phases of the pandemic before pulling back through mid-2022.

Executives highlighted that broader stability, suggesting it's a result of the chain's dominant position in a huge fast-food niche. "We delivered around one out of every three pizzas in the U.S. before the pandemic," CEO Russel Weiner said in a press release, "and we deliver around one out of every three pizzas today."

Spicy finances for Domino's

The chain is also faring better than most competitors when it comes to profitability. Sure, soaring food costs are affecting the bottom line. But Domino's is still generating steady and impressive earnings. Operating profit landed at $177 million, or 16.5% of sales in the third quarter compared to $180 million, or 18.1% of sales a year ago. That result puts Domino's well below industry leader McDonald's but above high-performing businesses like Chipotle Mexican Grill.

MCD Operating Margin (TTM) Chart

MCD Operating Margin (TTM) data by YCharts

Domino's cash generation is similarly strong, with operating cash over the last nine months reaching $330 million. The chain prides itself on its ability to produce lots of cash for franchisees, in part because of the tiny footprint of its store locations and the high volume of delivery and pickup orders.

Wait on buying Domino's stock

While those factors are all encouraging signs, there are still some good reasons for Domino's stock to be trailing the market in 2022. Its growth rate is still well below the nearly double-digit level that investors had enjoyed in the pre-pandemic days. It isn't clear yet that today's 2% expansion is just a temporary slowdown or a result of a flood of new competition in the home-delivery space.

McDonald's and Chipotle have each identified home delivery and drive-thru service as major growth vehicles over the next few years, and it is possible that these moves, plus many more new entrants, are beginning to fill in Domino's competitive moat.

That risk doesn't make Domino's a sell right now, especially given its financial strength. But it does suggest caution before jumping into shares, which are trading down over 40% so far in 2022.

That decline might turn out to be a screaming buy opportunity in retrospect, assuming Domino's returns to its prior momentum of steady market-share gains. But most investors will want to watch for concrete signs of that rebound before grabbing a slice of the fast-food stock.