Market Capitalization Calculator

The market capitalization calculator is a tool that helps you calculate market capitalization (market cap in short) – the total value of a company's outstanding shares. If you don't know what it is, don't worry – we will explain it in this short article. You will learn what market capitalization is, how to calculate it and discover the market capitalization formula. Interested? Keep reading!

Market capitalization, also used in the enterprise value method of company valuation, is the total value of outstanding shares of a given company.

This parameter can be used to determine the size of a company. Potential investors want to know it because, while it's reasonably easy to calculate, it provides a lot of information about the enterprise's other characteristics, such as the level of risk described in our risk calculator.

Using market capitalization also lets investors diversify their assets by including large-cap, mid-cap, and small-cap companies in their portfolios.

This division is based on the value of the market cap. Large-cap companies have a market cap of around $10 billion and more. Usually, this term refers to companies that have been operating for a long time. They are popular, stable, and well-established on the market, so investing in them is considered safe – even if short-term returns aren't spectacular, investors can expect continuing growth of share value.

Mid-cap companies are those with a market cap between $2 and $10 billion. They are not as well-established as large-cap companies, so there's more risk connected with investing in them; however, they are supposed to grow rapidly in the nearest future.

The last group, small-cap companies, includes ones with a market cap lower than $2 billion. Usually, they are young or operate in niche markets. The risk here is the highest among these three groups, but they might give investors the highest return on investment. Visit our ROI calculator to learn more about return on investment.

The calculation of market capitalization is pretty straightforward. Its formula consists of two elements:

• Current price of a single share;
• Number of outstanding shares of a company (the ones currently owned by the shareholders).

You only need to multiply the price of one single share by the number of all outstanding shares a company has. The formula is as follows:

Market capitalization = price of share × number of outstanding shares.

Let's analyze an example of a company that has been on the market for a few years. We're aiming to determine whether it's a large-cap, medium-cap, or small-cap company.

1. Find out how many outstanding shares the company has. Let's assume it's 10 million shares.

2. Determine the current price of one share. We can say the company sells them at a price of $100 per share.

3. Multiply the number of shares by the price according to the market capitalization formula:

   10M × $100 = $100M = $1B

4. The market capitalization is equal to $1 billion. We can conclude that this company is still a small-cap one but probably has some potential to become a medium-cap business in the foreseeable future.

For making money in stocks, it is crucial you do not buy at an overvalued price. When the market capitalization of a stock is at its top, the risk of losing money is high because if other stockholders decide to sell before you, you might incur a loss. Hence it is important to know at which price you are buying the piece of a company.

To do that, you can use our amazing discounted cash flow calculator that can indicate whether the stock is overpriced or not.