#stocks #market #capitalization
“Market capitalization is a way of looking at the size of a company. It is calculated as the stock price multiplied by the total number of issued and outstanding shares“– Paul Ebeling
For example, if a company’s stock is trading at 20/share, and there are 1,000,000 shares outstanding, then the market cap of that company is $20-M.
A small company is defined as one with a market cap between $300-M and 2-B.
A mid-cap company is defined as 1 between $2 and $10-B.
A large company is defined as 1 with a market cap larger than $20-B.
Micro-cap companies would define those below $300-M and Mega-cap companies would be those with above $200-B in market capitalizatio.
There are no small cap companies in the S&P 500.
The Russell US Indexes offer more breadth on the universe of publicly traded companies. The Russell 3000 includes the 3,000 largest US traded stocks. That index is then broken up into a Russell 1000 Index (with the 1,000 largest companies) and the Russell 2000 Index (with the remaining 2,000 companies).
The Russell 2000 index therefore includes no mega-cap or large-cap companies, it includes lots of small cap companies.
Market cap serves as a useful metric because it evaluates, as the name implies, the market value of a company based on how shareholders are interacting with its stock.
Another way of looking at a company’s worth without speculative market pricing is “book value,” which is a company’s net value based on its balance sheet; calculated as its assets minus its liabilities.
Have a prosperous day, Keep the Faith!
