Market capitalization

Market cap shows how big a company is in the eyes of investors, something the share price alone can't show.

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Market capitalization, or market cap, is the price of one share multiplied by the number of shares. It is the value the stock market puts on the whole company at a given moment.

Why the share price alone can mislead

Imagine two companies, each worth $10 billion. One has 100 million shares, so each share costs $100. The other has 1 billion shares at $10 each. The second company isn't smaller; it has simply divided its ownership into more pieces. Market cap puts both on the same scale.

Large and smaller companies

Investors often group companies by size. Every company StockLab covers is in the S&P 500, so all of them are large, but the biggest are worth many times more than the smallest.

Size says something about a business, but not everything. Large companies can shrink and smaller ones can grow. Market cap reflects what investors are paying today, which can change quickly, while revenue and profit show what the business has actually done.