What is market capitalization, or market cap? It depicts the size of that company, and we’ll teach you the five commonly used levels of market capitalization.
What is market capitalization, or market cap, you ask? Market capitalization, also known as “market cap” measures the total value of a company’s shares. This helps give insight to the size of the company.
You can determine the market cap of a company by multiplying the number of outstanding shares by the cost of one share.
For example, if a company was selling 30 millions shares at the cost of $1000 per share, what is the market capitalization? The market cap of that company would be $30 billion.
The five most commonly used market cap determinations are:
What is the Market Capitalization of Micro Cap Stocks?
Micro cap stocks are publicly traded companies with market capitalizations of less than $300 million but greater than $50 million.
Like small cap stocks, micro cap stocks have the potential to net very high returns, but because of their even smaller size, micro caps carry even greater risk than small caps.
Due to this, these stocks have shown themselves to be highly volatile in the past and if they are not managed properly, they may be risky investments.
What is the Market Capitalization of Small Cap Stocks?
Small cap stocks are publicly traded companies with market capitalizations between $300 million and $2 billion. As expected from their size, small cap stocks can be pretty risky.
Since they tend to be small and relatively unknown companies, small cap stocks have proven to be somewhat volatile in the past. However, they are definitely more stable than micro cap stocks and are likely to produce greater returns.
What is the Market Capitalization of Mid Cap Stocks?
Mid cap stocks are middle-sized publicly traded companies: larger than small cap stocks but smaller than large cap stocks. Mid cap stocks have a market capitalization between $2 billion and $10 billion.
Mid caps aren’t as risky as small cap stocks, but aren’t as “safe” as large cap stocks. However, the advantage they have over many of the biggest large caps stocks is that their greatest period of growth is often ahead of them.
What is the Market Capitalization of Large Cap Stocks?
Large cap stocks, also referred to as “big cap stocks”, are publicly traded companies that possess market capitalizations ranging from $10 billion to $300 billion.
These are companies that are established and well-known and are usually some of the most popular investments. Examples of these companies include McDonald’s (MCD), Verizon (VZ), Costco (COST), Target (TGT), and Nike (NKE).
As you can see, these are large and popular companies with strong holds on their respective markets .
What is the Market Capitalization of Mega Cap Stocks?
Mega cap stocks are comprised of the world’s largest public companies. The companies belonging to this exclusive group are titans of their industry and dominate on the world stage.
These companies possess market capitalizations upwards of $300 billion. Examples of these companies include Amazon, Apple, Facebook, Google, and Microsoft. As of July 10th, 2019, Microsoft holds the world’s largest market cap at $1.057 trillion. That’s larger than the GDP of most of the world’s nations.
As you can see, all of these are among the world’s largest companies. However, since they have already experienced their biggest periods of growth, they may not be the best investments for growth investors.
That doesn’t mean they are bad investments, you just want to make sure they will perform well in your portfolio.
Did that answer your question about market capitalization? What other questions do you have?