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Market capitalization: What it is and why it matters
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Market Capitalization: What It Is and Why It Matters
Market capitalization — or market cap — measures a company’s value based on the number of stock shares it has issued and the price at which investors are willing to buy them.
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Chris Davis is a Managing Editor on the Investing team. He has passed the Series 65 (Uniform Investment Adviser Law Exam) and covered the stock market, investing strategies, investment accounts and cryptocurrency. His work has appeared in The Associated Press, The Washington Post, MSN, Yahoo Finance, MarketWatch, Newsday and TheStreet. Published in Managing Editor + more + more
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Market Cap Overview Market Cap OverviewMarket capitalization is the total value of a company’s shares of stock.
Market capitalization is the total value of a company’s shares of stock.Market cap allows investors to evaluate a company based on how valuable the public perceives it to be.
Market cap allows investors to evaluate a company based on how valuable the public perceives it to be.Investing across market caps can help create a diversified portfolio.
Investing across market caps can help create a diversified portfolio.What is market capitalization?
What is market capitalization?Market capitalization, or market cap, is the total value of a company’s shares of stock. If a company has issued 10 million shares, and its share price is $100, its market cap is $1 billion.
Market capitalization, or market cap, is the total value of a company’s shares of stock. If a company has issued 10 million shares, and its share price is $100, its market cap is $1 billion.Market capitalization is calculated by multiplying the number of outstanding stock shares by the current share price. Shares outstanding include all shares — those available to the public as well as restricted shares held by specific groups.
Market capitalization is calculated by multiplying the number of outstanding stock shares by the current share price. Shares outstanding include all shares — those available to the public as well as restricted shares held by specific groups.Brokerage firms
Brokerage firms
Brokerage firmson Charles Schwab's website
on E*TRADE's website
on Vanguard's website
on Fidelity's website
What does market cap mean?
What does market cap mean?Market cap is a metric that makes it easier to understand a company's financial scope. It allows investors to size up a company based on how valuable the public perceives it to be. The higher the value, the "bigger" the company. The size and value of a company can inform the level of risk you might expect when investing in its stock, as well as how much your investment might return over time.
Market cap is a metric that makes it easier to understand a company's financial scope. It allows investors to size up a company based on how valuable the public perceives it to be. The higher the value, the "bigger" the company. The size and value of a company can inform the level of risk you might expect when investing in its stock, as well as how much your investment might return over time.Public companies are grouped by size based on their market capitalizations:
Public companies are grouped by size based on their market capitalizations:Large-cap ($10 billion or more).
Large-cap ($10 billion or more).Mid-cap ($2 billion to $10 billion).
Mid-cap ($2 billion to $10 billion).Small-cap ($250 million to $2 billion).
Small-cap ($250 million to $2 billion).Categorizing companies this way helps investors create a balanced portfolio that's optimized for long-term growth.
Categorizing companies this way helps investors create a balanced portfolio that's optimized for long-term growth.Below is a deeper dive into the major market-cap segments, but it’s important to remember the threshold isn’t clearly defined; the higher-value components of one segment can mix in with the lower-value segments of the next. Indexes and fund managers may have different definitions of market cap or use wider or narrower criteria. A company’s share price can also fluctuate enough to move it into a higher or lower market-cap category.
Below is a deeper dive into the major market-cap segments, but it’s important to remember the threshold isn’t clearly defined; the higher-value components of one segment can mix in with the lower-value segments of the next. Indexes and fund managers may have different definitions of market cap or use wider or narrower criteria. A company’s share price can also fluctuate enough to move it into a higher or lower market-cap category.Market cap segments
Market cap segmentsLarge-cap companies: $10 billion or more
Large-cap companies: $10 billion or moreLarge-cap companies tend to be those that are well-established and profitable, and are often household names, including:
Large-cap companies tend to be those that are well-established and profitable, and are often household names, including:Microsoft Corp.
Microsoft Corp.Johnson & Johnson.
Johnson & Johnson.JPMorgan Chase & Co.
JPMorgan Chase & Co.Exxon Mobil.
Exxon Mobil.General Mills.
General Mills.AutoZone.
AutoZone.Because they’re so established, large-cap companies are generally more stable. They’re reliable in terms of dividend payouts and typically don’t grab headlines the way some flashier stocks might. But this understated nature is actually what makes them attractive to investors — large-cap stocks are boring, which means they don't often fluctuate as wildly as small- or mid-cap stocks.
Because they’re so established, large-cap companies are generally more stable. They’re reliable in terms of dividend payouts and typically don’t grab headlines the way some flashier stocks might. But this understated nature is actually what makes them attractive to investors — large-cap stocks are boring, which means they don't often fluctuate as wildly as small- or mid-cap stocks.There are several mutual funds that track large-cap stocks, including iShares S&P 100 ETF, Vanguard Value ETF and Schwab U.S. Large-Cap Value ETF. Many brokerages offer tools to screen and discover more funds that track companies with specific market capitalizations.
There are several mutual funds that track large-cap stocks, including iShares S&P 100 ETF, Vanguard Value ETF and Schwab U.S. Large-Cap Value ETF. Many brokerages offer tools to screen and discover more funds that track companies with specific market capitalizations.» Learn how to invest in mutual funds
» » Learn how to invest in mutual fundsMid-cap companies: $2 billion to $10 billion
Mid-cap companies: $2 billion to $10 billionWhile large-cap companies have already seen rapid growth, mid-cap companies are often in the midst of it. And with that growth comes the opportunity for higher, faster gains but also the potential for more drastic downturns. Mid-cap companies are often household names, too, but typically aren’t national — or international — behemoths like the companies above. A few mid-cap stocks include:
While large-cap companies have already seen rapid growth, mid-cap companies are often in the midst of it. And with that growth comes the opportunity for higher, faster gains but also the potential for more drastic downturns. Mid-cap companies are often household names, too, but typically aren’t national — or international — behemoths like the companies above. A few mid-cap stocks include:Boston Beer Company (maker of Samuel Adams).
Boston Beer Company (maker of Samuel Adams).Wyndham Hotels and Resorts.
Wyndham Hotels and Resorts.Harley-Davidson.
Harley-Davidson.Asana.
Asana.American Airlines.
American Airlines.Small-cap companies: $250 million to $2 billion
Small-cap companies: $250 million to $2 billionSmall-cap stocks are often young companies with the potential for high growth. These stocks may have the possibility of high returns (that small-cap could indeed grow to be a mid- or large-cap), but they also come with the possibility of significant losses.
Small-cap stocks are often young companies with the potential for high growth. These stocks may have the possibility of high returns (that small-cap could indeed grow to be a mid- or large-cap), but they also come with the possibility of significant losses.Small-cap companies typically have only a few revenue streams, depend on overall U.S. economic growth and can feel the effects of taxes and regulations more profoundly than established businesses. If large-caps are the big cruise liners that can withstand the stormiest seas, small-caps are the sailboats that can be rocked by a single wave.
Small-cap companies typically have only a few revenue streams, depend on overall U.S. economic growth and can feel the effects of taxes and regulations more profoundly than established businesses. If large-caps are the big cruise liners that can withstand the stormiest seas, small-caps are the sailboats that can be rocked by a single wave.Still, the opportunity for growth they present can benefit an investor’s portfolio, provided the potential downside is buoyed by the relative stability of large-cap stocks. Examples of small-cap stocks include:
Still, the opportunity for growth they present can benefit an investor’s portfolio, provided the potential downside is buoyed by the relative stability of large-cap stocks. Examples of small-cap stocks include:Utz Brands Inc.
Utz Brands Inc.Lionsgate Studios.
Lionsgate Studios.Steve Madden.
Steve Madden.GoodRx.
GoodRx.The Russell 2000 Index tracks small-cap companies. There are several funds that track the Russell 2000, including the iShares Russell 2000 ETF and the Vanguard Russell 2000 ETF.
The Russell 2000 Index tracks small-cap companies. There are several funds that track the Russell 2000, including the iShares Russell 2000 ETF and the Vanguard Russell 2000 ETF.Micro- and mega-cap companies
Micro- and mega-cap companiesThere are two other market-cap categories, generally referred to as micro-cap (below $250 million) and mega-cap (the largest companies on the stock market, some of which overlap with large-cap).
There are two other market-cap categories, generally referred to as micro-cap (below $250 million) and mega-cap (the largest companies on the stock market, some of which overlap with large-cap).Micro-cap stocks are considered some of the riskiest investments. Many have virtually zero track record, and it’s possible they don’t even have any assets, operations or revenue to report. Mega-caps, meanwhile, represent the most established companies that often have large cash reserves that may help them weather economic downturns.
Micro-cap stocks are considered some of the riskiest investments. Many have virtually zero track record, and it’s possible they don’t even have any assets, operations or revenue to report. Mega-caps, meanwhile, represent the most established companies that often have large cash reserves that may help them weather economic downturns.» Related: What's a small-cap ETF?
» » Related: Related: What's a small-cap ETF?How to incorporate market cap in your portfolio
How to incorporate market cap in your portfolioWhen it comes to balancing your portfolio between companies with various market caps, generally, the longer the investment horizon you have, the riskier your allocation might be — a longer timeline means more opportunity for your portfolio to recover from volatility. Long-term investors — for example, those saving for retirement that's decades away — could benefit from the potential growth of small- and mid-cap companies and still have time to weather unexpected downturns.
When it comes to balancing your portfolio between companies with various market caps, generally, the longer the investment horizon you have, the riskier your allocation might be — a longer timeline means more opportunity for your portfolio to recover from volatility. Long-term investors — for example, those saving for retirement that's decades away — could benefit from the potential growth of small- and mid-cap companies and still have time to weather unexpected downturns.Investors who don’t want to take as much risk may want to root their portfolio in less-volatile large- and mega-caps, with a lower allocation of small- and mid-caps.
Investors who don’t want to take as much risk may want to root their portfolio in less-volatile large- and mega-caps, with a lower allocation of small- and mid-caps.Often, market-cap data is also used to manage mutual funds. These funds can hold stock in dozens or even hundreds of companies, allowing investors to purchase many stocks in a single transaction. Mutual funds often invest by category, so investors can buy small-cap or large-cap funds.
Often, market-cap data is also used to manage mutual funds. These funds can hold stock in dozens or even hundreds of companies, allowing investors to purchase many stocks in a single transaction. Mutual funds often invest by category, so investors can buy small-cap or large-cap funds.» Curious? Learn how to invest in mutual funds
» Curious? » Curious? Learn how to invest in mutual fundsMarket capitalization vs. float-adjusted market cap
Market capitalization vs. float-adjusted market capUnlike market cap, float-adjusted market cap (sometimes called free-float market cap) is calculated using only shares that are available to the general public, excluding locked-in shares, such as those held by institutions and government agencies.
Unlike market cap, float-adjusted market cap (sometimes called free-float market cap) is calculated using only shares that are available to the general public, excluding locked-in shares, such as those held by institutions and government agencies.Many major stock indexes like the S&P 500 and the Dow Jones Industrial Average use float-adjusted market cap, as do many index funds and exchange-traded funds. Float-adjusted market cap is meant to give an even more accurate picture of how the market views and values a company’s stock. Explore the specifics of the S&P 500 to learn more about this.
Many major stock indexes like the S&P 500 and the Dow Jones Industrial Average use float-adjusted market cap, as do many index funds and exchange-traded funds. Float-adjusted market cap is meant to give an even more accurate picture of how the market views and values a company’s stock. Explore the specifics of the S&P 500 to learn more about this .Market capitalization vs. enterprise value
Market capitalization vs. enterprise valueThere’s one final distinction to understand: Market capitalization isn't the same as a company’s enterprise value. While market cap measures the value of a company’s equity, enterprise value measures the total value of the business, including its debts, assets and cash. Enterprise value is more complicated to calculate, but it also provides an extremely clear picture of what a company is worth.
There’s one final distinction to understand: Market capitalization isn't the same as a company’s enterprise value. While market cap measures the value of a company’s equity, enterprise value measures the total value of the business, including its debts, assets and cash. Enterprise value is more complicated to calculate, but it also provides an extremely clear picture of what a company is worth.Enterprise value is mostly used to determine the price of a company if it were to be acquired outright. However, experienced investors can use enterprise value alongside other performance data to determine whether a stock price is currently under- or overvalued relative to similar companies.
Enterprise value is mostly used to determine the price of a company if it were to be acquired outright. However, experienced investors can use enterprise value alongside other performance data to determine whether a stock price is currently under- or overvalued relative to similar companies.» Want to learn more? Read about how to start investing in the stock market
» Want to learn more? » Want to learn more? Read about how to start investing in the stock marketFrequently asked questions
Frequently asked questionsWhat is a good market cap?
What is a good market cap?This is relative: A "good" market cap will align with your goals for your portfolio. Large-cap companies tend to be more stable and carry less risk than small-cap companies. And while small-cap companies may carry more risk, they can offer big rewards if they experience significant growth.
This is relative: A "good" market cap will align with your goals for your portfolio. Large-cap companies tend to be more stable and carry less risk than small-cap companies. And while small-cap companies may carry more risk, they can offer big rewards if they experience significant growth.What can market cap tell you?
What can market cap tell you?A company's market cap can tell you how much the larger stock market has determined that company is worth. The investing community uses market cap to get an idea of a company's size. Market cap can also give you an idea of how stable or risky a company is.
A company's market cap can tell you how much the larger stock market has determined that company is worth. The investing community uses market cap to get an idea of a company's size. Market cap can also give you an idea of how stable or risky a company is. Neither the author nor editor held positions in the aforementioned investments at the time of publication. Neither the author nor editor held positions in the aforementioned investments at the time of publication. Neither the author nor editor held positions in the aforementioned investments at the time of publication. About the author Chris Davis Chris Davis Chris Davis is a Managing Editor on the Investing team. He has passed the Series 65 (Uniform Investment Adviser Law Exam) and covered the stock market, investing strategies, investment accounts and cryptocurrency. His work has appeared in The Associated Press, The Washington Post, MSN, Yahoo Finance, MarketWatch, Newsday and TheStreet. See full bio.ON THIS PAGE
What is market capitalization? What is market capitalization? What does market cap mean? What does market cap mean? Market cap segments Market cap segments How to incorporate market cap in your portfolio How to incorporate market cap in your portfolio Market capitalization vs. float-adjusted market cap Market capitalization vs. float-adjusted market cap Market capitalization vs. enterprise value Market capitalization vs. enterprise value Frequently asked questions Frequently asked questionsON THIS PAGE
What is market capitalization? What is market capitalization? What does market cap mean? What does market cap mean? Market cap segments Market cap segments How to incorporate market cap in your portfolio How to incorporate market cap in your portfolio Market capitalization vs. float-adjusted market cap Market capitalization vs. float-adjusted market cap Market capitalization vs. enterprise value Market capitalization vs. enterprise value Frequently asked questions Frequently asked questions More like this Investment Basics Investing Stocks Best Robo-Advisors: Top Picks for 2026 We spent hours testing robo-advisors to find ones that charge low fees but still offer high-quality features, including automated portfolio rebalancing, exposure to a range of asset classes and financial planning tools. 2 By Alana Benson, Sabrina Parys Investing in Dividend Stocks: Guide, Calculator and Top 7 Yields for June 2026 Dividend stocks can be a great choice for investors looking for passive income and portfolio stability. Here's what to look for when evaluating dividend stocks and how to invest in them. 2 By Chris Davis, Sam Taube Best Brokers for Beginner Investors: Top Picks for 2026 We spent hours analyzing the best brokers for beginners to find ones that offer low costs, helpful educational content and a broad investment selection. Our testers also looked for trading platforms that are easy to navigate. 2 By Alana Benson, Bella Avila Best Investments: Where to Invest in 2026 Wondering where to invest your money this year? High-yield savings accounts, CDs, bonds, funds and stocks are all considered among the best investments available. Learn more about the risks, potential returns and how to get started. 2 By Chris Davis, Alieza Durana Best Brokerage Accounts for Online Investing and Stock Trading in 2026 Based on hours of analysis and hands-on testing, here are our picks for the best brokerage accounts based on their low fees, strong platforms, quality customer support and other factors. Chris Davis Best Robo-Advisors: Top Picks for 2026 We spent hours testing robo-advisors to find ones that charge low fees but still offer high-quality features, including automated portfolio rebalancing, exposure to a range of asset classes and financial planning tools. 2 By Alana Benson, Sabrina Parys Investing in Dividend Stocks: Guide, Calculator and Top 7 Yields for June 2026 Dividend stocks can be a great choice for investors looking for passive income and portfolio stability. Here's what to look for when evaluating dividend stocks and how to invest in them. 2 By Chris Davis, Sam Taube Best Brokers for Beginner Investors: Top Picks for 2026 We spent hours analyzing the best brokers for beginners to find ones that offer low costs, helpful educational content and a broad investment selection. Our testers also looked for trading platforms that are easy to navigate. 2 By Alana Benson, Bella Avila Best Investments: Where to Invest in 2026 Wondering where to invest your money this year? High-yield savings accounts, CDs, bonds, funds and stocks are all considered among the best investments available. Learn more about the risks, potential returns and how to get started. 2 By Chris Davis, Alieza Durana Best Brokerage Accounts for Online Investing and Stock Trading in 2026 Based on hours of analysis and hands-on testing, here are our picks for the best brokerage accounts based on their low fees, strong platforms, quality customer support and other factors. Chris Davis Best Robo-Advisors: Top Picks for 2026 We spent hours testing robo-advisors to find ones that charge low fees but still offer high-quality features, including automated portfolio rebalancing, exposure to a range of asset classes and financial planning tools. 2 By Alana Benson, Sabrina Parys Investing in Dividend Stocks: Guide, Calculator and Top 7 Yields for June 2026 Dividend stocks can be a great choice for investors looking for passive income and portfolio stability. Here's what to look for when evaluating dividend stocks and how to invest in them. 2 By Chris Davis, Sam Taube Best Brokers for Beginner Investors: Top Picks for 2026 We spent hours analyzing the best brokers for beginners to find ones that offer low costs, helpful educational content and a broad investment selection. Our testers also looked for trading platforms that are easy to navigate. 2 By Alana Benson, Bella Avila Best Investments: Where to Invest in 2026 Wondering where to invest your money this year? High-yield savings accounts, CDs, bonds, funds and stocks are all considered among the best investments available. Learn more about the risks, potential returns and how to get started. 2 By Chris Davis, Alieza Durana