Market capitalization, or market cap, is the combined value of all of a company’s outstanding stock. It is an estimate of the total value of a company.
Formula: Market Capitalization = Outstanding Shares * Stock Price
Company A has 2 million shares outstanding, and the stock price is $100 per share. The market cap of the company is $200 million (2 million * $100).
Company B has 20 million shares outstanding, and the stock price is $50 per share. The market cap of the company is $1 billion (20 million * $50).
Formula: How to calculate market cap
The formula to calculate the market capitalization of a company is simple:
Market Capitalization = Outstanding Shares * Stock Price
In other words, you multiply the number of outstanding shares with the stock price.
To find a company’s market cap, search for their name on this page. The stock overview page will list the company’s market cap, as well as the number of shares outstanding and current stock price.
Market cap categories
People often divide companies into different size categories based on their market cap:
- Micro-cap: Market cap of less than $300 million.
- Small-cap: $300 million to $2 billion.
- Mid-cap: From $2 billion to $10 billion.
- Large-cap: Greater than $10 billion.
However, there are no exact definitions for these categories, and the exact cutoffs vary.
Why it matters
Market capitalization is used as a convenient metric to estimate the total value of a company.
It is an estimate of how much it would cost to buy a company by purchasing all of the outstanding shares.
Market cap is also commonly used to compare the “sizes” of different companies.