Understanding Market Capitalization: A Comprehensive Guide

How to Calculate Market Capitalization in the Stock Market. Establishing the monetary size of a corporation is the basis for evaluating a company's overall value. People may just look at the price of a company's stock and think that determines value. Market capitalization is the overall value of a company according to the market. Read on to learn more.

Step 1

Ascertain the current price of the company's stock. This information is readily available from the company's web site, newspaper, or financial web site.

Step 2

Determine the total number of outstanding shares of stock for a company. Again, this information is readily available from the company's web site, newspaper, or financial web site.

Step 3

Multiply the total number of shares outstanding by the current share price of the company's stock. This number is the company's market capitalization. In essence, it is how much it would cost if a company or individual purchased all shares at the current stock price. For example, if there are 2 million outstanding shares of the company and the current price is 20 dollars, then the market capitalization of said company is 40 million dollars.

Step 4

Understand the classification of market capitalization. Small market capitalized stocks or small caps range in value from 300 million to 2 billion dollars. Middle market capitalization stocks or mid caps range in value from 2 billion to 10 billion dollars. Large market capitalization stocks or large caps are stocks with a market capitalization of over ten billion dollars. Mega market capitalization stocks or mega caps are stocks with a market capitalization of over 200 billion dollars.