Market Cap
Current share price × shares outstanding — what the whole company would come to at today's price (the company's size).
Market cap = current share price × shares outstanding
A large market cap means the market has assigned that large a value; by itself it doesn't say anything about whether the share price level is high or low.
In plain terms
Market cap is the money it would take to buy up every single share of a company at today's price. In other words, it's "the value the market puts on the whole company" — the company's "size."
If the share price is $500 but there are only 1 million shares, the market cap is $500 million; if the price is $50 but there are 1 billion shares, the market cap is $50 billion. Scale shows up in market cap, not in the per-share price.
What it tells you
Market cap is the yardstick that sorts companies into large-cap, mid-cap, and small-cap. Size affects how much the share price swings, how easily shares can be bought and sold, and which indexes a company is included in — so it's the starting point for telling investment characteristics apart.
Other valuation measures such as PSR (price-to-sales ratio) and enterprise value (EV) are all built on top of market cap.
Formula
Market cap = current share price × shares outstanding
What high or low means
A large market cap means the market has assigned that large a value; by itself it doesn't say anything about whether the share price level is high or low. The price level shows up relative to earnings or assets (PER, PBR).
Within the same industry, a larger market cap usually goes with a more mature and stable company, while a smaller one tends to come with both more room to grow and larger swings.
Market cap isn't the true amount it would take to acquire a company outright. In an acquisition you also take on the company's debt, while the cash it holds comes to you. That's why the figure closer to an actual acquisition price is enterprise value (EV = market cap + net debt). For a company with a lot of debt, EV is far larger than market cap.
Shares outstanding also include shares not yet floating on the market (the portions held by major shareholders and insiders). So it can differ from a size figure that counts only the shares actually traded on the market.
If stock options or convertible bonds are later turned into shares, the share count rises, so the very share count that the market cap calculation rests on can change.
The S&P 500, a benchmark US index, holds stocks in proportion to market cap. That means a few large companies drive the whole index — in 2024, the top seven firms such as Apple and NVIDIA alone accounted for about one third of the S&P 500.
This is how you get situations where "the index is up but the stock I hold is down." The index, lifted by a handful of giants, hides the weakness of the many other stocks. Note that what expresses a company's size is market cap, not the price per share — just as a stock split lowers the per-share price while market cap stays the same, market cap is not merely a "size number" but a weight that moves the market.
Metrics to read alongside
Guides that cover this term
See it in real stocks
Search US stocks on Stocklore to see Market alongside the sector benchmark.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.