What Is Market Capitalization?
Market capitalization is a company's total value in the stock market: the share price times the number of shares. How to calculate it, and what it does and doesn't tell you.
In one sentence
Market capitalization. A company's total market value: the share price multiplied by the number of shares outstanding. Often shortened to market cap.
How it works
A company's market capitalization, or market cap, is its total value in the stock market: the current share price multiplied by the number of shares outstanding.1
Market cap = Share price × Shares outstanding
| Company | Share price | Shares outstanding | Market cap |
|---|---|---|---|
| A | $500 | 10 million | $5 billion |
| B | $50 | 400 million | $20 billion |
B's shares cost a tenth as much, but the company is worth four times as much in the market. Share prices alone say nothing about size.
What it doesn't tell you
Market cap is the value of the shares only. A company with a lot of debt costs more to buy outright than its market cap suggests, which is why analysts also use Enterprise value. An estimate of what it would cost to buy a whole company: the value of its shares plus its debt, minus its cash. Glossary. And market cap is what the market pays today, not what the business is worth: that's the question of valuation.
Learn it properly
- Shares Outstanding and Market CapitalizationPart 2: What You Can Own · Free
Notes and sources
- Investor.gov, U.S. Securities and Exchange Commission. Glossary: Market Capitalization. Checked 2026-09-27. Back to text