You are right to think this isn't the best route. This route requires many manual steps, and is very error prone, and doesn't scale well.
When working with linux distributions, you should stick to the package management as much as possible.
The advantages of using package management:
- Dependency support
- Easy installation/removal
- Software inventory
- Upgrade/Downgrade support, including handling of configuration files
- The source package basically documents your build process, and automated it for you once it's written.
- Package signing
- and more.
When you start working from source only, you loose all of these great features, and things start to get messy pretty quickly.
In order to solve your spesific problem, you should check out the ubuntu backports repository, maybe they have an updated version for NGinx that you can use.
If they don't have a suitable version, then the best solution would be to create a backported ubuntu package yourself. It really isn't that hard, and it's less work than compiling it from source manually each time. Backporting requires, basically, taking the source package from ubuntu, replacing the old upsteam tar.gz file with the latest one that you want, and rebuilding the package.
You can use this guide to help you backport the package.