Glossary
Market Cap (Market Capitalization)
What the whole company is worth at today's share price: the price per share multiplied by the number of shares.
This is the single most useful number for answering how big a company is, and it is the reason a share price on its own is close to meaningless. A $10 share and a $1,000 share tell you nothing about relative size until you know how many of each exist.
Market cap is what the market currently says the company is worth, which is not the same as what its buildings, cash, and equipment would fetch. It moves every second the market is open, because one of the two numbers in the multiplication moves every second.
The convention is to sort companies into rough size bands, large cap, mid cap, and small cap, with the boundaries drawn differently by different providers. The bands matter because size tends to travel with other characteristics: how many analysts cover the company, how heavily its shares trade, and how far the price tends to move on a given day.
Learn this properly
Lesson 8: What is Market Capitalization?Market capitalization tells you the total value of a company. Here's what it means, why it matters, and how to use it when evaluating stocks.
Related terms
- FloatThe number of a company's shares actually available to trade, once restricted and closely held stock is excluded.
- Blue ChipAn informal label for a very large, long-established company with a long record of steady earnings.
- VolumeHow many shares changed hands over a period, usually reported as the total traded during a single day.
- Stock SplitA company dividing its existing shares into more shares, leaving each one proportionally smaller in value.
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