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What Is Market Capitalization?

What is market capitalization? It’s simply one measure of the size of a company, but a company’s “market cap” can tell you a lot about it.

piggy banks growing in size representing different market capitalizations

What is market capitalization, or market cap, you ask? Market capitalization, also known as “market cap” measures the total value of a company’s shares. This helps give insight into the size of the company.

You can determine the market cap of a company by multiplying the number of outstanding shares by the cost of one share.

For example, if a company had 30 million shares outstanding at the cost of $1,000 per share, the market cap of that company would be $30 billion.


Market Capitalization Breakdown

Micro-Cap Stocks

Micro-cap stocks are publicly traded companies with market capitalizations of less than $300 million but greater than $50 million (stocks below that size are nano-cap stocks).

Like small-cap stocks, micro-cap stocks have the potential to net very high returns, but because of their even smaller size, micro caps carry even greater risk than small caps.

Micro-cap stocks are typically very volatile and have low levels of institutional buying.

Small-Cap Stocks

Small-cap stocks are publicly traded companies with market capitalizations between $300 million and $2 billion. As expected from their size, small-cap stocks can be pretty risky.

Since they tend to be small and relatively unknown companies, small-cap stocks can also be volatile. However, they are typically more stable than micro-cap stocks and more likely to have institutional backing.

Mid-Cap Stocks

Mid-cap stocks are middle-sized publicly traded companies: larger than small-cap stocks but smaller than large-cap stocks. Mid-cap stocks have a market capitalization between $2 billion and $10 billion.

Mid-caps aren’t as risky as small-cap stocks, but aren’t as “safe” as large-cap stocks. However, the advantage they have over many of the biggest large-cap stocks is that their greatest period of growth is often ahead of them.

Large-Cap Stocks

Large-cap stocks, also referred to as “big cap stocks,” are publicly traded companies with market capitalizations ranging from $10 billion to $200 billion.

These are companies that are established and well-known and are usually some of the most popular investments. Examples of these companies include McDonald’s (MCD), Verizon (VZ), Costco (COST), Target (TGT), and Nike (NKE), to name a few. Put another way, if you’re familiar with a brand, it’s more likely than not a large-cap stock (or larger).

Mega-Cap Stocks

Mega-cap stocks are the world’s largest public companies. The companies belonging to this exclusive group are titans of their industries and dominate on the world stage.

These companies possess market capitalizations upwards of $200 billion. Examples of these companies include Amazon, Apple, Meta Platforms, Google, and Microsoft. Microsoft and Apple are currently neck and neck for the title of the largest company by market cap, just below $3 trillion apiece.

As you can see, all of these are among the world’s largest companies. However, since they have already experienced their biggest periods of growth, fully mature mega-cap companies can struggle to grow in normal market conditions.

Did that answer your question about market capitalization? What other questions do you have?


Cabot Wealth Network