Calculating market capitalization can be useful for comparing stocks in which to invest. Market cap is defined as the total dollar value of all a company's shares available on the market. It offers a metric that effectively gauges the size of a company and the space it occupies within the stock market. Market capitalization, or "market cap" for short, is frequently mentioned in stock market analysis conducted on financial television shows like CNBC or Bloomberg Television.
Locate the current share price of your chosen stock. You can obtain stock quotes from your broker either by searching the broker's service or calling them directly. Yahoo! Finance and Google Finance also offer free stock quotes and other effective investment and stock analysis tools.
Determine the number of shares outstanding for the company's stock. Shares outstanding are shares that have been purchased by investors. The number of shares outstanding can always be found in the "Investors" or "Investor Relations" section of a public company's website.
Multiply the current share price by the shares outstanding. For example, if stock XYZ is trading at $5.00, and there are 78,970,000 (often abbreviated as 78.97M) shares outstanding, the calculation is as follows: $5.00 x 78,970,000 = $394,850,000 in market capitalization. This number would be shown as $394.85M.
Companies deemed "micro cap" have market capitalization between $50 million and $300 million; when market capitalization is between $300 million and $1 billion it's called "small cap" and companies with market capitalization between $1 billion and $10 billion are considered "mid cap"
When companies have market capitalization of between $10 billion and $200 billion they are called "large cap" companies while companies with market capitalization over $200 billion are deemed "mega cap."
Compare the market cap of your chosen stock to a competitor's market cap. If company XYZ has $394.85M in market cap and company ABC has $260M in market cap, company XYZ would be considered to be a bigger company because it has more market capitalization.
Market cap must be used with other tools in your analysis to make a truly informed investment decision.