Market cap refers lớn the total value of a publicly traded company's shares. Shorthand for "market capitalization," market cap is one way an investor can evaluate how much a company is worth.

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To determine a company's market cap, simply multiply the nói qua price by the number of shares outstanding.


Here's Costco Wholesale (NASDAQ:COST) as an example. At recent prices, Costco shares sell for $302.45, with 441.52 million shares outstanding. In this case, $302.45 times 441.52 million equals a $133.54 billion market cap.

But why is market cap important và how should you use it? It's one of the best measures of a publicly traded company's size, which can tell you a lot about what to lớn expect if you buy its stock.

Large companies tend lớn have more stable and mature businesses, having proven themselves over time and weathered difficult business conditions to lớn emerge stronger. However, the growth prospects for large companies can be limited because they've already taken advantage of their primary opportunities khổng lồ grow lớn their current size.Smaller companies often have more room to lớn grow, but they are typically younger, with riskier business models that haven't yet proved themselves. Their odds of failure can be higher than those of larger companies, which presents added risk.

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Here's a quick breakdown of how market cap ranges are often segmented across companies of different sizes:

Chart by author. Type of Stock Market Capitalization Range
Mega cap More than $200 billion
Large cap $10 billion khổng lồ $200 billion
Mid cap $2 billion to $10 billion
Small cap $300 million to $2 billion
Micro cap $50 million lớn $300 million

In general, investors look at the market in the following three categories most often since these are the market cap categories most stocks tend to fall into.

What are large-cap stocks?

Large-cap stocks have market caps of more than $10 billion. Most of the best-known companies in the world are large caps, and these are typically the companies that have established themselves as the leaders in their industries. While many giảm giá with the ups and downs of their industry's cycles, these are often the strongest companies & have proven capable of holding off competitive threats. Large caps are often where you'll find the best dividend stocks. These large companies often generate more cash than they need for the business & return that extra capital to lớn investors in dividend payments.

Read more about large cap stocks.

What are mid-cap stocks?

Mid-cap stocks have market caps between $2 and $10 billion, occupying the middle ground between large and small companies. Mid-cap companies often have made considerable progress in building up successful business models, & that gives their investors some stability and protection against the future challenges smaller companies may face. Yet even with some track record, mid caps also may face the daunting task of beating out, or even disrupting, bigger and better-funded large-cap competitors to realize their own financial promise.

Not all mid caps are growth stocks. They may be companies that operate in a smaller niche without big growth prospects, or they may be former large caps that have declined due to changes in the competitive landscape or (as with many brick-and-mortar retailers) some industry disruption.

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Read more about mid-cap stocks.

What are small-cap stocks?

Small-cap stocks are generally defined as having market caps between $300 million and $2 billion. Sometimes companies with market caps below $300 million are in this group, although most categorize those as micro-cap stocks. They are generally growth stocks or upstarts just getting their feet under them and looking to vì something big. While small-cap stocks have historically delivered above-average returns as a group, many fail khổng lồ live up to lớn expectations. Small-cap stocks are more volatile than larger caps, meaning there is more risk of losses in the short term. These stocks are generally best owned as a diversified group, và for many years, in order lớn reduce those risks.