Price alone says little
Shares outstanding matter.
All tracks and lessons
Market capitalisation: large, mid and small
Market cap is share price × shares outstanding — the market’s price tag for the whole company.
In this lesson you will
- Calculate market cap
- Describe common size groups
- Explain cap weighting in indexes
Market capitalisation, or market cap, is the total value the market places on a company’s shares: share price multiplied by the number of shares outstanding.
Size groups
Investors commonly group companies by size. The exact cut-offs vary by source, but a common convention is large-cap above about $10 billion, mid-cap between about $2 billion and $10 billion, and small-cap below about $2 billion.
Why size matters
- Larger companies tend to be more established, with steadier prices.
- Smaller companies can grow faster but tend to be more volatile.
- Many index funds are built by size, such as large-cap or small-cap funds.
A high share price is not a big company
A $500 share can belong to a smaller company than a $50 share. Only price × shares tells you the size.
Cap-weighted indexes
Many indexes weight companies by market cap, so the largest companies have the biggest influence on the index. Education only — GetGuac does not recommend individual stocks.
By the GetGuac team · Editorial policy
Three ideas to keep
Size and volatility
Smaller companies often swing more.
Big companies drive cap-weighted indexes
Weight follows size.
Do it in 4 steps
Learn the formula
Price × shares outstanding.
Learn the common size groups
Large, mid, small.
Check a fund’s size focus
In its description.
Note index weighting
Cap-weighted or equal-weighted.
Price versus size
Two made-up companies.
| Company | Share price | Shares | Market cap |
|---|---|---|---|
| Example A | $500 | 4,000,000 | $2,000,000,000 |
| Example B | $50 | 400,000,000 | $20,000,000,000 |
The $50 share belongs to the company ten times larger.
Where this usually goes wrong
- Judging size by share price
- Assuming small companies always grow faster
- Ignoring how an index is weighted
Calculate the market cap of a made-up company: $25 share price, 80 million shares.
Tools and guides for this lesson
Quick quiz
1. Market cap equals…
2. Does a higher share price mean a bigger company?
3. In a cap-weighted index, the most influence comes from…
0 of 3 answered
Puzzle
A company’s shares trade at $25 and it has 80,000,000 shares. What is its market cap, and which common group is it in?
Show the answer
$2 billion — around the small/mid-cap boundary
$25 × 80,000,000 = $2,000,000,000. Exact cut-offs vary by source.