Seagate (NASDAQ:STX) makes most of its money from selling hard disk drives. These are computer storage drives that are popular for consumer and data center applications where cost-per-gigabyte (a gigabyte is a unit of computer storage) is more important than speed. 

Despite the fact that hard disk drives are being displaced in personal computers by faster storage drives based on NAND flash memory technology, Seagate's hard disk drive is still healthy. Last quarter, Seagate's hard disk drive business generated $2.59 billion in revenue, a figure that was up 6.7% year over year and represented more than 92% of its revenue during the quarter.

Various computing devices on a table with a television mounted on the wall.

Image source: Seagate.

"The growth in hyperscale and cloud storage deployments continues to represent an important opportunity for Seagate, and we are confident in our nearline hard disk drive portfolio designed to serve these environments," Seagate CFO David Morton said on the company's most recent earnings call.

With that background in mind, here are three metrics that investors interested in Seagate need to keep a close eye on.

1. Free cash flow

One reason that Seagate stock might be appealing to some investors is the fact that it pays a handsome dividend. As of this writing, the dividend yield on the company's shares was 4.46%.

As I wrote previously, Seagate's dividend is backed by strong free cash flow generation. It makes sense, then, for investors to keep an eye on the trend in the company's free cash flow per share

STX Free Cash Flow Per Share (TTM) Chart

STX Free Cash Flow Per Share (TTM). Data source: YCharts.

In a nutshell, the more free cash flow per share that a company generates, the more it can afford to raise its dividend, ultimately boosting the income that it can regularly pay out to its stockholders.

As you can see in the chart above, Seagate's free cash flow per share over the last 12 months has been $5.16 -- a little over twice its current dividend. What this tells us is that Seagate can more than afford to pay the current dividend and I wouldn't be surprised to see that dividend payout rise as the company's free cash flow per share grows.

2. Exabyte shipments

Seagate breaks out the revenue that it generates from its hard disk drive business, which is a good indicator of the health of that business. However, another metric that investors should pay close attention to is the trend in the number of exabytes that the company ships. An exabyte is a really large unit of storage that works out to 1 billion gigabytes.

The trend in exabyte shipments is a good supplementary piece of information that can tell us how industry-wide demand for hard disk drive storage -- Seagate's core business -- is trending.

Although we could, in theory, just look at the revenue figures that Seagate reports, Seagate and its competitors could very well try to grow revenue in a potentially dwindling hard disk drive market by charging more per exabyte in a bid to maximize profits before the party ends.

If exabyte shipments trend nicely upward, then that'd be a sign that, even in a world where NAND flash and other types of solid state storage devices are becoming more popular, there's robust demand for hard disk drive-based storage, too.

The good news is that this figure has been healthy. Last quarter, Seagate reported shipping 87.4 exabytes of hard disk drive capacity. That figure was up from 65.5 exabytes in the same quarter a year ago and up even more from 55.6 exabytes in the year before.

For now, at least, demand for hard disk storage seems to be trending in the right direction -- up!

3. Progress beyond hard disk drives

Although hard disk drives are likely here to stay for the foreseeable future, the reality is that there continue to be significant advancements in NAND flash technology that make it increasingly cost effective over time.

Now, hard disk drive makers have outlined plans to continue advancing hard disk drive technologies so that they remain ahead of NAND flash-based drives in terms of cost-per-gigabyte (see the image below from Seagate's chief rival, Western Digital (NASDAQ: WDC) for a good illustration of that trend).

A chart illustrating how hard disk drive cost per gigabyte is coming down in lock step with NAND flash price per gigabyte.

Image source: Western Digital.

Nevertheless, there may come a time when NAND flash-based drives start seeing more aggressive cost per gigabyte reductions than hard disk drives can (the hard disk drive makers are already pulling out all the stops just to try to keep the lead that they do). In that case, it's important for hard disk drive makers like Seagate to have viable NAND flash-based businesses.

Western Digital solved this problem when it acquired flash storage specialist SanDisk back in 2015. SanDisk was already a major developer of solid state drives for a broad range of markets from mobile to data center and SanDisk had a joint venture in place with Toshiba Memory Corporation to manufacture the NAND flash chips used in these solid state storage drives.

Seagate, on the other hand, has been less aggressive with respect to its solid state storage business. The company has acquired a handful of technology assets over the years to allow it to build its own solid state drive solutions, but those organic efforts have seen minimal success. On top of that, Seagate doesn't have the same level of access to NAND flash supply and input in NAND flash technology development that, say, Western Digital does.

Ultimately, this uninspiring strategy has led to less-than-stellar results in the company's enterprise systems, flash, and other business unit. Last quarter, it generated just $217 million in sales -- down from $250 million in the same period a year ago and even down from $224 million in the year before that.

Seagate signed a large NAND flash supply agreement with Toshiba Memory Corporation late last year to improve its access to NAND flash, a move that could help improve Seagate's longer-term prospects in the NAND flash-based storage drive business. 

Investors should keep an eye on the performance of this business unit to see if it can finally get on track to become a much more significant contributor to Seagate's overall business performance in the coming years. If so, then I think that'd be a positive for Seagate stock (it could command a higher multiple on such diversification, for instance).

Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.