How to Use the FMP Ratings Snapshot API to Find Great Stocks

Investing in stocks requires careful research and analysis. One of the most effective ways to evaluate a company's financial health is by using key financial metrics. The FMP Ratings Snapshot API provides a quick and easy way to analyze companies based on critical financial scores, helping investors pick great shares.

What is the Ratings Snapshot API?

The Ratings Snapshot API is a tool that provides financial ratings for companies based on important metrics such as return on equity, debt levels, and valuation ratios. This API offers an overall rating along with individual scores that assess different aspects of a company's financial health. Investors can use this data to identify undervalued stocks, strong performers, and companies with low risk.

Key Metrics and How They Help Investors

The API returns several key financial scores for a company, each of which can be used to evaluate a stock's investment potential:

- Overall Rating: A summary score that gives a quick assessment of a company's financial standing.
- Discounted Cash Flow (DCF) Score: Helps investors determine if a stock is overvalued or undervalued based on future cash flow projections.
- Return on Equity (ROE) Score: Measures how efficiently a company generates profit from shareholders' equity. Higher ROE is a positive indicator.
- Return on Assets (ROA) Score: Shows how effectively a company utilizes its assets to generate earnings.
- Debt-to-Equity Score: Evaluates a company's financial risk by comparing its debt to equity. A lower score indicates a stronger balance sheet.
- Price-to-Earnings (P/E) Score: Helps investors assess if a stock is fairly priced compared to its earnings. A low P/E ratio could indicate an undervalued stock.
- Price-to-Book (P/B) Score: Compares the company's market price to its book value, helping investors identify potential bargains.

Example: Apple (AAPL) vs. NVIDIA (NVDA)

Let's compare Apple and NVIDIA using the Ratings Snapshot API to see what their financial scores reveal.

Apple (AAPL) Ratings Snapshot:

- Overall Rating: B
- DCF Score: 3 (Moderate valuation based on future cash flow)
- ROE Score: 5 (Highly efficient in generating profit for shareholders)
- ROA Score: 5 (Strong asset utilization for earnings generation)
- Debt-to-Equity Score: 1 (Low debt, strong financial stability)
- P/E Score: 1 (High valuation, could be overvalued)
- P/B Score: 1 (High market price compared to book value)

What This Means for Investors:

- Apple has a strong ROE and ROA, meaning it efficiently generates profit and uses its assets well.
- Its low debt-to-equity score suggests a strong balance sheet with minimal financial risk.
- However, its low P/E and P/B scores indicate that the stock is expensive compared to its earnings and book value, meaning it might not be undervalued.
- Investors should consider buying Apple if they believe in its long-term growth despite its high valuation.

NVIDIA (NVDA) Ratings Snapshot:

- Overall Rating: B+
- DCF Score: 4 (Slightly better valuation than Apple)
- ROE Score: 5 (Strong profitability for shareholders)
- ROA Score: 5 (Efficient use of assets for earnings)
- Debt-to-Equity Score: 3 (Moderate debt levels, higher risk than Apple)
- P/E Score: 1 (High valuation, possibly overvalued)
- P/B Score: 1 (High market price compared to book value)

What This Means for Investors:

- NVIDIA, like Apple, has high ROE and ROA scores, meaning it's a fundamentally strong company with high profitability.
- Its higher debt-to-equity score (3) suggests it carries more debt than Apple, making it riskier in times of financial downturns.
- The DCF score of 4 suggests that its valuation is slightly more attractive than Apple's when considering future cash flows.
- Like Apple, NVIDIA has low P/E and P/B scores, meaning it is priced expensively compared to its earnings and book value.
- Investors should consider NVIDIA if they believe in the company's long-term potential and can handle a higher risk profile due to its debt levels.

How Investors Can Use the API to Find Great Stocks

By using this API, investors can quickly filter and compare different stocks based on their financial scores. Here's how:

1. Identify Strong Performers: Look for companies with high ROE and ROA scores. These companies efficiently generate profits and utilize assets well.
2. Assess Financial Stability: A low debt-to-equity score indicates that a company is not heavily reliant on borrowed money, reducing financial risk.
3. Find Undervalued Stocks: Stocks with low P/E and P/B ratios could be undervalued and offer good investment opportunities.
4. Compare Different Companies: Use the API to compare multiple stocks side by side, making it easier to choose the best one.
5. Track Market Trends: Investors can track companies over time to see if their financial health is improving or deteriorating.

Example API Usage

To use the API, you need to choose a ticker symbol (e.g., AAPL for Apple) and provide a custom API key. The API will return financial scores for that company, which investors can then analyze to make data-driven investment decisions.

https://financialmodelingprep.com/stable/ratings-snapshot?symbol=AAPL&apikey=YOUR_API_KEY

The FMP Ratings Snapshot API is a powerful tool for investors who want to analyze stocks efficiently. By leveraging financial ratings and scores, you can quickly identify strong companies, undervalued opportunities, and financially stable businesses. Start using the Ratings Snapshot API endpoint today and take your stock analysis to the next level!