You really want it to look like this. I file the steel flat so it has a nice interface with the housing ferrule and open up the teflon tube so the cable has unrestricted flow inside the housing.
For mountain bikes I like to add a housing seal in any area where the possibility of dirt and/or water could get inside the housing and compromise performance.
After I get the new cable and housing on, I'll pull on one of the exposed sections of cable to "seat" everything as much as possible. I'll also lube the pivots on the derailleur and check the main mounting bolt and jockey wheel bolts for tightness while I'm back there looking around. This way I know that everything is G.T.G. (Good To Go) for the next ride.