Market capitalization, or market capitalization, refers to the value of a company and is a measure of a company’s size. Market capitalization is the value you get when you multiply all the shares outstanding by the price of one share. For example, if a company has 10 million shares outstanding and its share price is $ 5, the market capitalization is $ 50 million. Market capitalization is usually indicated on stock quotes that you find online.
Companies are grouped into market capitalization categories that are references to how large a company is measured by its market value. Here are five major categories of market capitalization:
1) Microcapital (less than $ 250 million): the smallest companies and the riskiest stocks. Penalty shares fall into this category.
2) Small capitalization ($ 250 million to $ 1 billion): stocks with higher growth potential but higher risk. Usually include new or young companies.
3) Medium capitalization ($ 1 billion to $ 5 billion): some part of the security of large investments with some growth potential for small investments. These companies run in the market longer than smaller companies, and their shares tend to have lower price volatility.
4) Large capitalization ($ 5 billion to $ 250 billion): stocks for a conservative investor who wants steady growth with greater security. These stocks are called “blue chips” and include companies like IBM.
5) Mega cap (over $ 250 billion): The largest companies that are usually leaders in their industry. Examples include Wal-Mart and Exxon.
There is no universal agreement on the exact categories. Many investors prefer the system of three constraints: small, medium and large, while others prefer to break it down into more than the five categories listed above.
The market capitalization classification allows you to estimate growth against equity risk potential. Larger capitalizations experience slower growth with less risk, while smaller capitalizations provide greater growth potential but with higher risk. Market capitalization is important to consider, but don’t invest just because of it. You can determine the value of a company in different ways, and market capitalization is just one of the indicators of value.