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What is Market Capitalization

Understand market cap, the most important metric for sizing companies, and learn about large-cap, mid-cap, and small-cap stocks.

RiverLabs
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What is Market Capitalization

Market capitalization (market cap) is the total market value of a company's outstanding shares. It's calculated by multiplying the stock price by the total number of shares.

Understanding Market Cap

Market cap = Share Price x Shares Outstanding

For example, if a company has 1 million shares trading at $100 each, its market cap is $100 million.

Market Cap Categories

Large-Cap Stocks ($10B+)

  • Well-established, stable companies
  • Examples: Apple, Microsoft, Amazon
  • Lower risk but slower growth potential

Mid-Cap Stocks ($2B - $10B)

  • Balance of growth and stability
  • Often in expansion phase
  • Examples: Etsy, Zillow, DocuSign

Small-Cap Stocks ($300M - $2B)

  • Higher growth potential
  • More volatile and risky
  • Less analyst coverage

Why Market Cap Matters

  • Helps compare companies fairly
  • Indicates risk level and volatility
  • Used for index fund composition
  • Guides portfolio diversification
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