In what will mark the one-year anniversary of its split with HP, HP Enterprise (HPE 1.18%) is scheduled to report its fiscal 2016 fourth-quarter and annual earnings Nov. 22. Most pundits are expecting the same from HP Enterprise as it delivered last quarter: continued growth in earnings per share along with a slight decline in total revenue.

While an earnings and revenue beat or miss will almost certainly be the impetus for a near-term stock jump or easing depending on which side of the fence HP Enterprise lands on, there are a few areas investors would be wise to watch for. Sure, beating expectations would be nice, but over the long haul, the rise or fall of HP Enterprise stock depends on its ability to deliver in several key areas.

Image source: HP Enterprise.

Show me the money

According to HP Enterprise CFO Tim Stonesifer, earlier guidance for fiscal 2016 EPS of $1.90 to $1.95 excluding one-time items and returning over $3 billion to shareholders in the form of its recently raised dividend and share buyback initiative remain on track. Stonesifer also said he's confident HP Enterprise will generate at least $1.7 billion in free cash flow (FCF), possibly even $1.9 billion, in fiscal 2016.

If HP Enterprise delivers on its expectations -- its fiscal 2017 guidance is for a whopping $2.1 billion to $2.3 billion in free cash flow -- it should continue the recent trend of strengthening its balance sheet. Last quarter, HP Enterprise boosted its cash and equivalents hoard to $10.74 billion, a $900 million improvement from a year ago.

Another arrow in HP Enterprise's cash quiver is the $2.5 billion check it will receive from Micro Focus (MCFU.F) when its $8.8 billion spinoff merger deal closes early next year. All that ready cash means shareholders can expect an ongoing dividend, boosting share value further with buybacks, and positions HP Enterprise to responsibly acquire niche firms to fill specific product and service needs.

Lean and mean

The company's expense management efforts will receive a boost from the shedding of its "non-core software assets" in the Micro Focus deal, and spinning off its money-losing Enterprise Services group and merging it with Computer Science Corp. (CSC) in a deal valued at $8.5 billion. The merger with CSC alone will shed some 100,000 jobs off HP Enterprise's books.

Without the impact of paring its workforce in the CSC arrangement, HP Enterprise was still able to cut its costs and expenses by approximately $1 billion last quarter compared to a year ago. Of the eight line items included in HP Enterprise's list of costs in the third quarter, other than acquisitions, every single expense declined year over year.

Strict expense oversight translates to an improved bottomline. For example, if HP Enterprise  delivers on its EPS target of $0.60 a share this quarter, it will equal a 13% year-over-year improvement despite expectations of a 5% drop in revenue to $12.80 billion. And with positive changes coming in the form of ongoing management and divestitures, HP Enterprise should continue to reward shareholders with an improved bottom line.

More from less

After adjusting for expenses last quarter, HP Enterprise's gross margin increased to 9% from  last year's 8%. Though any kind of quantum leap in gross margins isn't likely until after the aforementioned mergers, it's still worth keeping tabs on in HP Enterprise's fourth quarter and into fiscal 2017.

Assuming HP Enterprise reports continued declines in overhead, improving margins are yet another means of essentially getting more from less: in HP Enterprise's case, that translates to profitability growth.

Post-mergers, HP Enterprise will be ideally suited to focus on a few fast-growing markets that represent more than $250 billion of opportunities. But there are areas investors can monitor today including a stronger balance sheet, managing expenses, and boosting margins to determine if HP Enterprise is on course. Don't be surprised if HP Enterprise answers those questions with a resounding "yes."