Ever seen a company say its “market cap” is $5 billion? And no, they’re not referring to a very expensive snapback.
Ever seen a company say its “market cap” is $5 billion? And no, they’re not referring to a very expensive snapback.
Market capitalisation refers to how much a company is worth on the stock market. And there’s a pretty simple equation to figure it out: number of outstanding shares x share price = market cap.
So if there are 1,000,000 shares on the stock market, and the share price of that company is $100, the company has a ‘market cap’ of $100 million.
Market cap is a quick and easy way for investors to gauge how big a company is.
But because you need shares and a share price to work it out, market cap only works with public companies.If you’re trying to diversify your portfolio, market cap will help you pick companies of different sizes i.e. large-cap (above $10 billion), mid-cap ($1 to $10 billion) or small-cap ($50 to $500 million).
This is always a changing beast.
Why? Because the number of shares outstanding can change and the share price always is changing. But, for the last few years, we’ve seen Apple hit a market cap over $2 trillion. INSANE.
Saudi Aramco, Microsoft and Amazon are also up there. In Australia, we’ve seen BHP leading the charge with a market cap >$150 billion and then Commonwealth Bank of Australia (aka CBA aka CommBank aka Big Yellow) with a market cap over $100bn.
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