What is Market capitalisation?
Bozor kapitalizatsiyasi
In short
A company's total market value: share price × shares outstanding.
Also known as: market cap, kapitalizatsiya
Market capitalisation is a company's total value on the stock market — what the market values all of its shares at right now.
Formula
Market cap = Share price × Shares outstanding
That is why a share price on its own says nothing about a company's size. A $500 stock can belong to a small company and a $20 stock to a giant — it all depends on the number of shares. A stock split changes the price, not the market cap.
Size categories
A rough, widely used breakdown (the cut-offs vary by source):
- Mega cap: above $200B;
- Large cap: $10–200B;
- Mid cap: $2–10B;
- Small cap: $300M – $2B;
- Micro cap: below $300M.
Generally, the smaller the company, the more volatile and less liquid its stock — though its growth potential can be greater too.
Where it is used
- Indexes. Many indexes, such as the S&P 500, weight companies by market cap.
- Valuation. Market cap is compared with earnings, revenue or cash (P/E, P/S).
- Shariah screening. Some standards measure debt and interest-bearing assets relative to market cap — see the methodology for details.
Market cap covers only the equity; it ignores the company's debt and cash. A fuller measure that adds them is enterprise value (EV).
Example
Two fictional companies:
- Company A: share price $500, 20,000,000 shares. Market cap: $500 × 20M = $10B.
- Company B: share price $20, 2,000,000,000 shares. Market cap: $20 × 2B = $40B.
B's shares are 25 times cheaper, yet the company is 4 times bigger than A.
If A does a 5-for-1 split, the price becomes $100 and the share count 100,000,000. Market cap: $100 × 100M = still $10B — unchanged.
Mistakes and tips
Compare companies by market cap, not by share price.
Size positions smaller in small caps: they swing harder and are harder to exit on bad news.
Market cap changes daily — do not take a figure from an old article as today's.
Frequently asked questions
- Is market cap a company's true value?
- It is only the market's valuation on that day. It shifts quickly with sentiment and can be above or below the company's intrinsic value.
- Is a large-cap company safe?
- Large companies are usually more stable and liquid, but they can still fall sharply. Size reduces risk; it does not remove it.
Learn it in the Academy
This term is covered with hands-on examples and a quiz in these lessons of the interactive course.
- What a stock is and why its price movesA stock is a real slice of a business. IPOs, market cap, how price forms, where returns come from, and the risks.Open lesson · 11 min
- Valuation: P/E, P/S, EV/EBITDA and PEGIs a stock expensive or cheap? Trailing vs forward P/E, P/S, P/B, P/FCF, EV/EBITDA, PEG, earnings yield, historical ranges and valuing a company with scenarios.Open lesson · 13 min
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