What Is Market Cap? Why It Matters More Than the Share Price

Market capitalization, or market cap, is the total value the stock market places on a company, calculated as its share price multiplied by the number of shares outstanding. It is the standard measure of how big a company is, and it is the number that separates a giant from a minnow far better than the share price does.

New investors often judge a company by its share price, assuming a 500 dollar stock is bigger or more expensive than a 20 dollar stock. Market cap is the number that actually answers the size question. This page explains what market cap is, how it is calculated, why it matters more than the share price, and how the tiers work. It is descriptive throughout.

How market cap is calculated

The formula is simple:

market cap = share price times shares outstanding

If a company's stock trades at 40 dollars and it has 1 billion shares outstanding, its market cap is 40 billion dollars. That figure, not the 40 dollar share price, is what tells you the company's size. Shares outstanding is the count of all the shares the company has issued and that are held by investors.

Why the share price alone is misleading

A share price on its own says nothing about size, because it depends entirely on how many shares a company has chosen to split itself into. A company worth 40 billion dollars split into 1 billion shares trades at 40 dollars. The same company split into 100 million shares would trade at 400 dollars, and it would be exactly the same size. This is why comparing two companies by their share prices tells you almost nothing, and why a stock split, which just divides the existing shares into more pieces, does not change a company's market cap.

The market cap tiers

Companies are commonly grouped by size, and the labels come up constantly:

• Large cap: roughly 10 billion dollars and up. The biggest, most established names.
• Mid cap: roughly 2 to 10 billion dollars.
• Small cap: roughly 300 million to 2 billion dollars.
• Micro cap: below that.

The boundaries are conventions and shift over time, but the idea holds: the tier describes the company's scale, its liquidity, and often how much its price moves.

Market cap in crypto

The same idea applies to cryptocurrencies, where market cap is the price of one coin multiplied by the number of coins in circulation. A coin priced at a few cents can have a larger market cap than one priced at thousands of dollars if far more of it is in circulation, which is again why the per-unit price alone is misleading.

On Kresmion, each company's research page shows its latest price, its largest institutional holders from 13F filings, and its recent SEC filings, so you can see who owns a company alongside what it has disclosed.

Key takeaways

Frequently asked questions

How is market cap calculated?

Market cap equals the current share price multiplied by the number of shares outstanding. A 40 dollar stock with 1 billion shares has a 40 billion dollar market cap.

Does a higher share price mean a bigger company?

No. The share price depends on how many shares a company has divided itself into, so a 500 dollar stock can be a smaller company than a 20 dollar one. Market cap, not the share price, tells you the size.

What is the difference between large cap and small cap?

They are size tiers. Large cap usually means a market cap of about 10 billion dollars or more, the largest and most established companies, while small cap usually means roughly 300 million to 2 billion dollars. Small caps tend to be less liquid and their prices often move more.

How does crypto market cap work?

It is the price of one unit multiplied by the number of units in circulation. As with stocks, the per-coin price on its own does not tell you the total size, because a low-priced coin can have a huge supply.

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Source: market capitalization is a standard measure (share price multiplied by shares outstanding). Kresmion research pages show each company's latest price, its largest institutional (13F) holders, and its recent SEC filings. This page is information, not investment advice. Kresmion Research.