What Is Market Cap?
Market cap, short for market capitalization, is what the whole company is worth on the stock market. It is the share price times the number of shares.
How market cap is calculated
A company has 1 billion shares at $50 each. Its market cap is $50 billion. In theory, that is the price to buy every share.
Why share price alone tells you nothing
A $500 share is not more "expensive" than a $50 share. It depends on how many shares exist. Market cap shows the real size. That is also why a stock split does not change what a company is worth.
Large cap, mid cap, small cap
- Large cap: roughly above $10 billion. Big, well-known companies.
- Mid cap: roughly $2 to $10 billion.
- Small cap: below about $2 billion. Often younger, with more room to grow and more volatility.
Is a higher market cap better?
Not by itself. A bigger company is often more stable, but it is harder for it to double in size. What matters is whether the price is fair for the profit the company makes. That is what the P/E ratio helps you judge.
Market cap vs enterprise value
Market cap ignores debt and cash. Enterprise value adds them in, which gives a fuller picture of what buying the whole business would cost.
See it in real companies
Open a company to see what it sells and how it makes money.