How to Pick Great Investment Ideas Using Financial Modeling Prep APIs

Step 1: Define What Makes a Great StockBefore you start pulling data, think about what makes a stock a good investment for you. Here are some factors to consider:

• Strong Financial Health: Look for companies with low debt, steady cash flow, and solid balance sheets.
• Growth Potential: Companies with consistent earnings growth or expanding markets are often winners.
• Undervaluation: Stocks trading below their true value can be great buys.
• Analyst Support: Stocks with positive analyst ratings often have strong market confidence.

With these factors in mind, let's explore how to use FMP's API to find stocks that match your criteria.

For example, you might want companies with a low Beta (less volatile stocks) or a high market capitalization (more stable, larger companies).Here's how to use it:

• Example: Let's say you want stocks with a market cap over $10 billion, and a Beta lower than 1 Your request might look like this:

  https://financialmodelingprep.com/api/v3/stock-screener?marketCapMoreThan=10000000000&betaLowerThan=1&apikey=YOUR_API_KEY

• What You Get: A list of companies matching your criteria, including their ticker symbols, names, and key metrics.

This endpoint helps you narrow down thousands of stocks to a shortlist of promising ones. For example, you might find companies like Apple (AAPL) or Microsoft (MSFT) if they meet your filters.

Step 4: Check Financial Health with the Company Profile Data API and Financial Statements Growth APIs. Once you have a shortlist, dig deeper into each company's financial health. The Company Profile Data API gives you a quick overview of a company, including its industry, market cap, and beta (a measure of risk). The Financial Statements Growth API provides detailed data like income statements growth, balance sheets statement growth, and cashflow statement growth.

• Company Profile Data Endpoint:

https://financialmodelingprep.com/stable/profile?symbol=AAPL&apikey=your_api_key

This returns info like Apple's CEO, industry (Technology), and market cap. Check if the company operates in a growing sector like tech or renewable energy.

• Income Statement Growth Endpoint:

https://financialmodelingprep.com/stable/income-statement-growth?symbol=AAPL&apikey=your_api_key

Look at revenue and net income trends. Are they growing year over year? Consistent growth is a good sign.

• Balance Sheet Growth Endpoint:

https://financialmodelingprep.com/stable/balance-sheet-statement-growth?symbol=AAPL&apikey=your_api_key

Growing debt can be a bad sign as it can create liquidity issues.

For example, if a company's revenue is growing but its debt is low, it might be a solid investment. Compare these metrics across your shortlist to spot the strongest candidates.

Step 5: Find Undervalued Stocks with the DCF Valuation API. To find stocks that are trading below their true value. This endpoint estimates a company's intrinsic value based on its future cash flows.

• Endpoint:

https://financialmodelingprep.com/stable/discounted-cash-flow?symbol=AAPL&apikey=custom_api_key

• What You Get: The DCF value compared to the current stock price. If the DCF value is higher than the market price, the stock might be undervalued.

For instance, if Apple's DCF value is $200 per share but it's trading at $150, it could be a bargain. This helps you find stocks with room to grow.

Step 6: Gauge Market Sentiment with the Financial Estimates and Stock News API. Market sentiment can influence a stock's performance. Use the Financial Estimates API to see what analysts predict for a company's future revenue and earnings per share (EPS).

• Endpoint:

https://financialmodelingprep.com/stable/analyst-estimates?symbol=AAPL&period=annual&page=0&limit=10&apikey=custom_api_key

• What You Get: Forecasts for revenue, EPS, and more. Strong projections suggest analysts are bullish on the stock.

You can also use the Stock News API to check recent headlines:

• Endpoint:

https://financialmodelingprep.com/stable/news/stock?symbols=AAPL&apikey=custom_api_key

• What You Get: News articles about the company. Positive news (like new product launches) can signal growth potential, while negative news (like lawsuits) might be a red flag.

Combining analyst forecasts with news helps you understand whether the market is excited about a stock. If you are interested in the practical application of those endpoints, you can read my other article on How to Create Your Own Stock Analysis Chrome Extension, where I explain how to build your own simple extension using the mentioned endpoints. To understand how this extension works, you can see my video: Your Go-To Chrome Extension for Smart Stock Insights

• Compare Metrics: Rank your shortlist based on key metrics like growth, valuation, and analyst estimations.
• Diversify: Don't put all your money in one stock. Spread your investments across industries (e.g., tech, healthcare, energy) to reduce risk.