Is your stock truly improving or just riding market hype? Equity analysts often grapple with this question. Event-driven strategies that chase one-off earnings surprises or price spikes can miss the bigger picture.

In this guide, we introduce fundamental momentum - a repeatable scoring model that tracks steady multi-quarter improvement in a company's performance. We'll define a “Fundamental Momentum Scorecard” using FMP's Key Metrics and Earnings APIs.

This structured approach helps buy-side analysts, equity researchers, and quants identify quality compounders and validate their investment recommendations with data-driven confidence.

What Is Fundamental Momentum, and Why Does It Matter?

Fundamental momentum refers to consistent improvement in a company's fundamentals over multiple quarters. Instead of focusing on short-term price momentum, we examine metrics like earnings per share (EPS), return on equity (ROE), and profit margins to see if a business is steadily strengthening.

Academic research shows that price momentum is often just a reflection of earnings momentum - stocks with strong fundamental momentum (like rising earnings) tend to outperform those with weak fundamentals. In other words, when a company repeatedly delivers higher profits and returns, the market eventually takes notice.

For investors, fundamental momentum offers a reliable gauge of quality and persistence. A firm that grows its EPS and maintains or expands its margins quarter after quarter is likely executing well on strategy. This consistency can differentiate true “compounders” - businesses capable of compounding value over time - from those that merely have a good quarter due to cyclical or one-off factors.

By focusing on multi-quarter trends, you filter out noisy, event-driven swings and zero in on companies “trending in the right direction” fundamentally. The result is a more durable form of momentum that complements traditional price-based analysis.

Data Requirements: Leveraging FMP's Key Metrics and Earnings APIs

To evaluate multi-quarter consistency, we need historical fundamentals for each quarter. Gathering this manually from financial statements is tedious, but FMP's APIs automate the process:

Earnings API provides a historical list of quarterly earnings announcements, including dates, actual EPS, estimated EPS, and revenue for each quarter. For example, querying the Earnings endpoint for Apple

https://financialmodelingprep.com/stable/earnings?symbol=AAPL&apikey=api_key

returns recent quarters with fields like:

{ "symbol": "AAPL", "date": "2025-10-30", "epsActual": 1.85, "epsEstimated": 1.78, "revenueActual": 102466000000, "revenueEstimated": 102227074560, ... }

This single API call gives us Apple's EPS and revenue for the last four quarters, which we can use to track EPS growth and even derive profit margins (net income over revenue).

Key Metrics API offers a wide array of financial metrics each quarter, from balance sheet ratios to returns. Notably, it includes profitability measures like Return on Equity (ROE) and others. For example, the Key Metrics endpoint for Apple

https://financialmodelingprep.com/stable/key-metrics?symbol=MSFT&period=quarter&limit=4&apikey=api_key

yields data points per quarter such as returnOnEquity, returnOnAssets, and various margins and ratios. We'll tap into ROE as a proxy for profitability momentum (since ROE encapsulates net margin and efficiency).

Together, these two APIs arm us with the raw materials for a fundamental momentum tracker. The Earnings API feeds us quarterly EPS (actual performance vs. expectations), and the Key Metrics API provides profitability ratios like ROE (and potentially margin data) for the same quarters. Both endpoints support specifying a number of periods (limit parameter), so with one call each we can retrieve, say, the last 4 or 8 quarters for any company. This longitudinal data is the backbone of our consistency model.

Expert Tip: You can try these APIs for your stocks of interest to follow along. For instance, test the Key Metrics API on a favorite ticker to instantly get its multi-quarter ROE, or use the Earnings API to pull historical EPS trends. (Ensure you have an FMP API key) Each endpoint returns structured JSON that's easy to parse for building custom analytics.

Building a Multi-Quarter Consistency Scorecard

With our data in hand, let's construct the Fundamental Momentum Scorecard. The idea is to rate each company's consistency by checking how often key metrics improved quarter-over-quarter. Our model will focus on three metrics: EPS, ROE, and profit margin. We assign a simple +1 / -1 score for each sequential change in these metrics:

Earnings per Share (EPS) Momentum

Compare each quarter's EPS to the previous quarter's. If EPS increased, score +1 (positive earnings momentum); if it decreased, score -1. Over four quarters, there are three quarter-to-quarter changes, so an EPS momentum score can range from +3 (if EPS rose in every interval) to -3 (if EPS fell each time). This captures short-term earnings growth consistency.

Return on Equity (ROE) Momentum

Similarly, look at ROE each quarter. ROE measures how effectively a company generates profit from shareholders' equity. Scoring +1 for an uptick in ROE or -1 for a drop reflects profitability momentum. A steadily rising ROE indicates improving efficiency or margins, whereas declining ROE may signal margin pressures or higher leverage without commensurate profit.

Profit Margin Momentum

Track a margin metric (e.g. net profit margin) quarter-over-quarter, scoring +1 for improvement or -1 for deterioration. Margin captures the company's ability to turn revenue into profit. Consistent margin expansion suggests strengthening pricing power or cost control, while shrinking margins could be a red flag.

After scoring each quarter-over-quarter change, we can sum the scores for each metric. For example, if a company's EPS rose in 2 of the last 3 intervals and fell in 1, its EPS momentum score = +1 (since +2 for the rises, -1 for the drop, netting +1). We can also combine the metrics into an aggregate Fundamental Momentum Score by summing the EPS, ROE, and margin scores. This composite would reward companies that show broad-based improvement. However, you may choose to keep the metrics separate to pinpoint where momentum is strongest (earnings vs. profitability).

Scoring rubric recap: Increase quarter-over-quarter = +1, decrease = -1 (no change would be 0). Over N quarters, each metric has N-1 comparisons contributing to its score. This rubric is deliberately simple and transparent. Analysts can adjust it as needed (for instance, weighting EPS changes more heavily if earnings growth is primary, or using year-over-year comparisons for seasonal businesses). The core idea, though, is a repeatable model that treats multi-quarter fundamental improvements as a quantitative signal.

Let's illustrate this with real data and a sample scorecard.

Fundamental Momentum Scorecard Example (4 Companies, 4 Quarters)

To make things concrete, we evaluate four well-known companies side by side: Apple (AAPL), Microsoft (MSFT), Visa (V), and Nvidia (NVDA). Using FMP's APIs, we pulled each firm's actual EPS and ROE for the last four quarters (all data are for fiscal quarters in 2024-2025). The table below shows the quarterly EPS and ROE, along with the momentum scores calculated for each metric:

Quarterly EPS and ROE Trends (Last 4 Quarters) and Momentum Scores:

Company	Q1 EPS	Q2 EPS	Q3 EPS	Q4 EPS	EPS Momentum	Q1 ROE	Q2 ROE	Q3 ROE	Q4 ROE	ROE Momentum
Apple (AAPL)	2.4	1.65	1.57	1.85	-1 (fell 2 of 3 intervals)	54.40%	37.10%	35.60%	37.30%	-1 (fell, then slight rise)
Microsoft (MSFT)	3.23	3.46	3.65	4.13	+3 (rose every quarter)	7.96%	8.02%	7.93%	7.64%	-1 (uptick, then declines)
Visa (V)	2.75	2.76	2.98	2.98	+2 (rose, then flat)	13.37%	12.04%	13.64%	13.43%	0 (mixed, ended near start)
Nvidia (NVDA)	0.81	0.89	0.81	1.05	+1 (two rises, one dip)	29.30%	27.90%	11.20%	26.40%	-1 (fell sharply, then rebounded)

Quarterly EPS and ROE Trends (Last 4 Quarters) and Momentum Scores:(EPS in USD; ROE in percent. Q1 represents the earliest quarter in the sequence and Q4 the latest. “Momentum” is the net +/- score over the three quarter-to-quarter changes.)

EPS Momentum Analysis

Looking at the EPS momentum first, the scorecard immediately flags Microsoft as a standout.

• MSFT's EPS increased every quarter (from $3.23 to $4.13), giving it a perfect +3 score.
• Visa's EPS rose in two quarters and was flat in the last, for a solid +2.
• Nvidia had one quarterly dip (0.89 down to 0.81) amid otherwise strong growth, netting +1.
• Apple shows a -1: its EPS actually fell in the two middle quarters before recovering in the latest quarter.

This negative sequential score for Apple is largely due to seasonal sales patterns (Apple's holiday quarter is always its biggest, followed by a drop in spring), illustrating how seasonality can affect raw momentum scores. In practice, an analyst might adjust for that by comparing year-over-year Q3 EPS instead of sequential Q2 to Q3. Apple's year-over-year EPS growth is positive - but our simple model, looking quarter-to-quarter, registers the intra-year dip as negative momentum. It's a reminder to interpret the scorecard with context.

ROE Momentum Analysis

On the ROE momentum side,

• Apple again shows a dip (from an exceptionally high 54% ROE in its holiday quarter down to ~36% mid-year, then a slight uptick).
• Microsoft's ROE was very stable around ~8%, ticking up then down, ending a bit lower - a net -1 score.
• Visa's ROE dipped and then recovered, effectively no net change over the period (we assign 0 since it finished near where it started).
• Nvidia's ROE saw a dramatic swing: extremely high in late 2024 (over 29%), plummeting in early 2025 (to 11% - perhaps due to a spike in equity from retained earnings or a one-time charge), then bouncing back above 26%.

The net -1 highlights the volatility, even though Nvidia's latest ROE is strong. Such volatility in ROE might prompt a deeper look - was the dip due to an accounting quirk or a fundamental issue? This is where the scorecard sparks further analysis.

Profit Margins Discussion

What about profit margins? If we were to include net profit margin momentum, we would see a similar pattern to ROE for many companies, since ROE partly reflects margin changes.

• Microsoft, for instance, expanded its net margin over the period (its net profit grew faster than revenue), which would score positively.
• Apple's net margin likely contracted then expanded again (matching its ROE trend).
• Visa's margins stayed exceptionally high with minor fluctuation (little net change)
• Nvidia's margins jumped around with its earnings surge.

For brevity, we haven't tabulated margin % values, but an analyst could easily calculate quarterly net margin from the revenue and net income (EPS × shares) to score it. In practice, consistently rising profit margins are a hallmark of quality - the scorecard would reward that with +1s accordingly.

Overall Fundamental Momentum Score

Finally, we can derive an overall Fundamental Momentum Score by combining the metrics.

For example, Microsoft scores +3 (EPS) + (-1) (ROE) + (approximately +1 for margin) ≈ +3 overall, still the leader of this group. Visa and Nvidia come out around +1 overall, and Apple around -2 (again, due to seasonal EPS declines; if using year-over-year EPS growth Apple would score differently).

This ranking aligns with intuition: Microsoft exhibited the most persistent, broad-based improvement, while Apple's fundamentals, though strong in absolute terms, were less consistent quarter-to-quarter. Visa and Nvidia both had strengths (Visa's steady EPS growth, Nvidia's explosive revenue/EPS growth) tempered by some quarterly variability.

Interpreting the Scorecard

A higher score suggests the company has positive fundamental momentum across multiple dimensions - a potential “compounder” that is executing well each quarter. A low or negative score flags inconsistency: either the company's performance is volatile or trending downward in key areas, warranting caution. Importantly, the scorecard isn't a verdict in isolation; rather, it's a starting point for deeper research. It helps rank a watchlist quickly by consistency, so you can focus on understanding why certain companies shine or falter on this metric.

Using Fundamental Momentum to Find Quality Compounders

The multi-quarter consistency model we've built adds structure to the nebulous idea of companies with improving fundamentals. By quantifying it, analysts can screen and rank firms by fundamental momentum just as they do by price momentum or valuation multiples. This approach has several benefits:

Identify High-Quality Stocks

Companies that consistently grow EPS and maintain high ROE likely have durable competitive advantages or superior management. These are often the “high quality, compounder” stocks that long-term investors prize. A strong fundamental momentum score can bring such companies to the forefront, even if they're not the most hyped in the market.

Avoid One-Hit Wonders

Event-driven momentum (like a single blowout quarter) can send a stock soaring, but is it repeatable? The scorecard highlights whether a company's latest success is part of a reliable trend or an outlier. For example, if a company's sales and margins have been improving for 4+ quarters straight, an investor can have more confidence that the recent strong earnings aren't a fluke. On the other hand, a firm that scored, say, -4 on fundamental momentum might be relying on unsustainable factors or facing headwinds not obvious from one quarter alone.

Support (or Challenge) an Investment Thesis

Buy-side associates and equity research teams often build a narrative around why a stock is a buy or sell. Checking fundamental momentum provides an objective check. If you expect a company to continue growing steadily, you'd want to see positive momentum historically. Strong momentum scores can bolster your conviction and provide talking points in an investment memo

Combine with Other Factors

The fundamental momentum score doesn't exist in a vacuum. Some sophisticated strategies, like “Twin Momentum,” combine fundamental momentum (earnings growth, ROE) with price momentum to select stocks that excel in both dimensions. The rationale is that such stocks have improving business performance and positive market sentiment - a powerful combination.

Our scorecard could be one leg of that twin momentum approach. For instance, you might screen for companies with a Fundamental Momentum Score above a threshold and then among those, pick the ones with strongest 12-month price performance. This ensures you're not just chasing hot charts, but backing it with fundamental proof.

Fundamental Momentum Tracker built with FMP's APIs gives you a powerful lens on consistency. It quantitatively answers: Is this company's fundamental performance getting better or worse over time? By defining a clear scoring model for multi-quarter EPS, ROE, and margin trends, we remove some of the guesswork and bias from that assessment. The result is a repeatable framework that can surface high-quality investment ideas and add an extra layer of validation to your analysis.

FAQs

How is fundamental momentum different from the traditional price momentum investors talk about?

Price momentum refers to stocks that have had strong recent share price performance, whereas fundamental momentum refers to improvements in a company's financial performance (earnings, returns, margins) over time. Traditional momentum strategies look at stock returns (assuming recent winners keep winning), while a fundamental momentum approach looks at business metrics (assuming companies with improving fundamentals will eventually see their stock outperform).

Why use four quarters for the momentum model? Can I use more (or fewer)?

Four quarters (one year) is a convenient timeframe to gauge recent consistency without getting too lagged. It captures any seasonal patterns and a full year of execution. However, you can certainly adjust the window. Using more quarters (e.g. 8 or 12 quarters) might smooth out volatility and identify longer-term trends - helpful for assessing companies through full business cycles. A shorter window (2-3 quarters) will be more reactive and may flag very recent momentum shifts, but could also be noisy. The choice depends on your goal: shorter horizon for tactical signals, longer horizon for strategic, durable momentum.

How do I account for seasonality or other external factors in the scorecard?

Seasonality is important. For highly seasonal businesses (retailers, cyclicals, etc.), sequential quarter comparisons might mislead. In such cases, use year-over-year comparisons - e.g., compare Q4 this year to Q4 last year - to judge improvement. Our +1/-1 scoring can be applied to year-over-year changes as well (did EPS in the latest quarter grow vs the same quarter a year prior?). This often gives a better read on momentum for seasonal firms. Also, be aware of external factors: macroeconomic cycles, one-time gains or losses, accounting changes, etc. If a score is being driven by an unusual item (say, a big tax benefit boosting one quarter's net income), you might adjust that data point or make a note in your analysis. The scorecard is a starting point - analysts should overlay judgment especially when non-recurring factors are at play.

Can the Fundamental Momentum Score be negative, and what does that signify?

Yes, a company can have a negative total score if most of its fundamental changes are in the wrong direction. For example, if revenue, earnings, and margins all declined for a couple of quarters, the score will be negative (indicating fundamental deterioration momentum). A negative scorecard isn't necessarily a do-not-invest signal, but it does raise a red flag. It suggests the company has been struggling recently. You'd want to investigate why - is it a temporary setback (like an economic downturn or investments that will pay off later), or a sign of eroding competitiveness? Sometimes a negative-momentum company can become a turnaround story (which could be an opportunity if you predict the inflection), but you'd need a strong thesis on what will reverse the decline. In general, consistently negative momentum is a caution sign to be corroborated with other analysis.

Besides EPS and ROE, what other metrics could I include for a more comprehensive momentum analysis?

There are several you might consider, depending on the aspects of performance you care about. Revenue growth is a common one - a company that's growing its top line quarter after quarter has sales momentum. Free cash flow (FCF) is another excellent metric; you can track FCF per share or FCF margin for improvement (sometimes earnings can be managed, but cash flow is harder to fudge). Debt levels or leverage ratios could be included if balance sheet improvement (deleveraging) is a focus - e.g., a +1 if debt-to-equity falls, -1 if it rises. Return on invested capital (ROIC) or return on assets (ROA) can complement ROE to gauge efficiency trends.

How do I implement this scoring in practice? Do I need to code?

You can calculate the scores with very basic tools. If you have the data (from FMP's APIs), it's a matter of comparing numbers. In Excel or Google Sheets, you could set up a sheet where you input the last few quarters of metrics, and use simple formulas to check if each quarter is higher or lower than the previous. A formula like =IF(Q2_EPS > Q1_EPS, 1, IF(Q2_EPS < Q1_EPS, -1, 0)) would generate +1/-1 for each comparison, and then you sum them. If you prefer coding, a few lines in Python or JavaScript can fetch data via API and compute scores.