Spark Global Limited reports:
In this article, we’ll help clarify market capitalization, the difference between large-cap and small-cap stocks, and things to consider when trading both classes.
What is market value?
Market value is what investors value a company at a given point in time. This measure refers to the total value of a company’s outstanding shares.
Outstanding shares include all shares, including those available to the general investing public and restricted shares held and available by specific groups.
To calculate market value, you simply multiply the price of a stock by the total number of shares outstanding.
Market value = number of shares outstanding x price
For example, a company that sold 30 million outstanding shares at $10 a share would have a market value of $300 million.
Based on current market values, the stocks of listed companies are divided into large-cap, mid-cap and small-cap stocks. Some traders break it down further to include extreme small-cap and large-cap stocks.
Let’s dig deeper into large and small large enterprises.
What is a large-cap stock?
Large-cap stocks are stocks of companies with a market capitalization of $10 billion or more.
These companies dominate their industries and often have a significant impact on the economy.
Their businesses are more diversified and may include a wide range of services and products across multiple industries.
What is a small cap?
Small-cap companies typically have market values between $300 million and $2 billion.
They are usually new companies with financial difficulties or a focus on niche markets.
In general, small caps have a narrow business scope, operate in a few geographic areas and offer fewer services or products.
They also tend not to be profitable. They usually reinvest all their profits back into the company to help it grow.
The large-cap example
In the United States, examples of large companies include jpmorgan Chase (NYSE: JPM), Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), Coca-Cola (NYSE: KO), General Motors (NYSE: GM), and Disney (NYSE: DIS), both of which are established giants with good positions in their respective industries.
The small-cap example
Consider a company like Copus Holdings (NYSE: KOP), which currently has 21 million shares outstanding and trades at $33 per share. As a result, its market value is €696 million.
Other small-cap companies include Zynex Medical (NASDAQ: ZYXI), Regenxbio (NASDAQ: RGNX) and Ontrak (NASDAQ: OTRK). Small-cap companies are generally seen as more sensitive to the economic cycle than large-cap companies.
Reprint indicated source：Spark Global Limited information