Market Capitalization Calculator
What is Market Capitalization?
Market capitalization, commonly referred to as "market cap," represents the total dollar market value of a company's outstanding shares of stock. It is a crucial metric for investors because it determines a company's size and total value on the open market, rather than just looking at the individual share price.
How to Calculate Market Cap
The calculation is straightforward. You multiply the current market price of one share by the total number of outstanding shares. The formula is:
Market Cap = Share Price × Total Outstanding Shares
For example, if a company has 10 million shares outstanding and each share is trading at $50, its market capitalization is $500 million.
Market Cap Categories
Investment professionals generally categorize companies based on their market cap size. These categories often dictate the risk and growth potential of the investment:
| Category | Market Valuation |
|---|---|
| Mega-Cap | $200 Billion and greater |
| Large-Cap | $10 Billion – $200 Billion |
| Mid-Cap | $2 Billion – $10 Billion |
| Small-Cap | $300 Million – $2 Billion |
| Micro-Cap | $50 Million – $300 Million |
| Nano-Cap | Below $50 Million |
Why Market Cap Matters
Understanding market cap helps investors build a diversified portfolio. Large-cap companies are generally considered more stable and less volatile, often paying dividends. Mid-cap and small-cap companies often offer higher growth potential but come with increased risk and price fluctuations.
It is important to note that market capitalization does not represent the "equity value" or the "enterprise value" of a company, as it does not account for debt or cash on hand. However, it remains the primary way the investment community measures a company's size.