How do investors use market cap?

Investors can use market cap to gauge public interest and company strength. Market cap, or market capitalization, is a simple investing concept that can help you better understand a company's market value. Knowing a company's market cap might help you gauge its risks and help you decide whether a stock or fund belongs in your portfolio.

What is market cap & why is it important?

Market cap is a metric that makes it easier to understand a company's financial scope. It allows investors to size up a company based on how valuable the public perceives it to be. The higher the value, the "bigger" the company.

How do you calculate a company's market cap?

You can calculate a company's market cap by using the market capitalization formula. Market cap = number of outstanding shares × price per share For instance, say a company has 12 million shares currently selling at $32 per share. That comes out to a market cap of $384 million, which puts this company in the small-cap category today.