What is market cap?

Market cap is an investment term used to describe the market value of a publicly-traded stock’s outstanding shares. In other words, the market cap is essentially how much it would cost to purchase every share of a company at its current price.

How do you calculate market cap?

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 cap is calculated by multiplying the number of stock shares outstanding by the current share price.

Why does the market cap change?

Essentially, the changes in market cap are largely attributed to the share price changes, though investors should keep an eye on corporate-level developments that may change the number of outstanding shares once in a while.

Should you look at the market cap of a company?

Looking solely at the market cap will give investors an idea of how much a company is worth, but it fails to account for debt and locked-in shares held by executives. Therefore, it is better to view a company’s market cap as a complement to other metrics. Only once all the metrics are accounted for will the market cap begin to tell a better story.