What is the Market Cap of a Company?
A company’s market capitalization often referred simply as the “market cap”, is one way to measure how much a company is worth. The market cap is determined by the stock market and is calculated by multiplying the total number of outstanding shares by the price of one share.
The market cap can offer investors an understanding of how large a company is and can help categorizing companies based on size.
- Small Cap: Small cap companies are companies worth less than $2 billion, but more than $300 million, these companies are usually in the growth stage and can also be considered relatively risky for investing. Small-cap companies tend to be young companies or serve niche markets, and only have a few different revenue streams. Some well-known small cap companies include Upwork, Abercrombie & Fitch, and FitBit.
- Mid Cap: Mid cap companies are often more established, and worth somewhere between $2-$10 billion. These companies are expected to see large spurts of growth, but their market also tends to be quite volatile, with strong downturns in the mix. Mid cap companies grant more stability than smaller businesses and have a track record that offers insight into their history. Some well-known mid cap companies include American Eagle Outfitters and Domino’s Pizza.
- Large Cap: Large cap companies are the well-established businesses in the stock market. These organizations are worth more than $10 billion and mostly include mature and well-known companies like Apple, Bank of America, and Exxon Mobile.