Market capitalisation (market cap) is what the market currently values all of a company's outstanding shares at. You get it by multiplying the current share price by the number of shares outstanding. A company with 100 million shares at $50 has a market cap of $5 billion. The number measures size. It does not tell you whether a stock is cheap, healthy or a good business. For crypto assets, data providers use the same idea with token supply: price multiplied by circulating supply.
The formula and a worked example
Market cap = share price × shares outstanding
| Component | Value |
|---|---|
| Shares outstanding | 100,000,000 |
| Share price | $50.00 |
| Market cap | $5,000,000,000 ($5B) |
FINRA's investor guide describes the same calculation: take the total number of shares outstanding and multiply it by the current stock price.
Three consequences follow from this arithmetic:
- Market cap moves with the price. If the share price goes from $50 to $55, market cap rises to $5.5B, even though nothing changed in the business.
- Share price alone says nothing about size. One million shares at $500 make a $500M company. One billion shares at $10 make a $10B company, twenty times larger.
- Splits don't change it. A 2-for-1 split doubles the share count and halves the price, so the product stays the same.
Full market cap vs. free-float market cap
Not every outstanding share can be bought. Insiders, founders, governments or strategic holders may own large blocks that rarely trade. The free float is the part that is actually available to the public. Free-float market cap counts only those shares, so it is equal to or lower than full market cap.
This matters because the major index families weight their constituents by free float. S&P Dow Jones Indices describes its indices as float-adjusted market capitalisation weighted. A company's index weight therefore depends on its float-adjusted value, not its full market cap. For the S&P Composite 1500, a candidate also needs a float-adjusted market cap of at least 50% of the relevant index's minimum.
| Full market cap | Free-float market cap | |
|---|---|---|
| Shares counted | All outstanding shares | Shares available to the public |
| Includes insider and strategic blocks | Yes | No |
| Used for | Headline company size | Index weighting |
Market cap tiers: the ranges investors use
There is no official legal definition of "large-cap" or "small-cap". FINRA's investor education page gives these general ranges and notes that "the delineation between each group can vary":
| Tier | Market value (FINRA guide) |
|---|---|
| Mega-cap | $200 billion or more |
| Large-cap | $10 billion to $200 billion |
| Mid-cap | $2 billion to $10 billion |
| Small-cap | $250 million to $2 billion |
| Micro-cap | Less than $250 million |
The FINRA page is dated 30 September 2022. Fund managers and data providers often draw the lines differently, so check the definition behind any fund or screener labelled "mid-cap" or "small-cap".
S&P index thresholds (current as of the July 2026 methodology)
S&P Dow Jones Indices publishes its own size thresholds for adding companies to its US indices. It last changed them on 1 July 2025, and its July 2026 methodology document lists the same figures:
| Index | Total company market cap required for addition | Previous range |
|---|---|---|
| S&P 500 | US$22.7 billion or more | US$20.5 billion or more |
| S&P MidCap 400 | US$8.0 billion to US$22.7 billion | US$7.4 billion to US$20.5 billion |
| S&P SmallCap 600 | US$1.2 billion to US$8.0 billion | US$1.1 billion to US$7.4 billion |
Three details are often misread:
- The thresholds apply to additions only. An existing member that falls below the range is not removed for that reason alone.
- They are reviewed at the start of every calendar quarter and updated when market conditions warrant it. The figures above can change.
- Size isn't the only test. The same factsheets also require minimum float, liquidity and positive earnings: positive earnings in the latest quarter and over the trailing four quarters combined.
In April 2026, S&P DJI opened a consultation on easing these entry rules for very large new listings. An AP report says the index committee decided not to change the inclusion criteria for the S&P 500, MidCap 400 or SmallCap 600. The exact date of that decision could not be confirmed.
Because the thresholds rise with the market, a company described as "large-cap" two decades ago may count as mid-cap under today's ranges.
How the tiers tend to differ
Larger companies generally have more analyst coverage, more trading volume and an easier time absorbing large orders. Smaller companies tend to have thinner trading and larger price swings. These are tendencies, not rules. A large company can still carry heavy debt or fall sharply, and a small one can be stable.
How market cap is used in practice
- Screening. Filtering by tier narrows a universe to companies of comparable size and liquidity.
- Understanding index funds. In a cap-weighted index, the largest companies by float-adjusted value get the largest weights. Owning an S&P 500 tracker means owning more of the biggest US companies by construction. Equal-weight or factor-weighted funds behave differently.
- Reading a sector. A sector dominated by a few very large companies looks different from one with many small companies. Size distribution is one clue to how concentrated a market is.
Market cap is a starting point. Valuation needs earnings, cash flow, growth and the balance sheet as well.
Market cap or enterprise value?
Enter a company's market cap, debt, preferred stock and cash to see how its enterprise value compares with its headline market cap.
| Market cap (share price × shares outstanding) | Total debt | Preferred stock (leave at 0 if your data source excludes it) | Cash and cash equivalents | Enterprise value |
|---|---|---|---|---|
| 5 $B | 0.5 $B | 0 $B | 1 $B | 4.5 $B |
| 5 $B | 0.5 $B | 0 $B | 1 $B | 4.5 $B |
| 5 $B | 3 $B | 0 $B | 0.2 $B | 7.8 $B |
- All values are your own inputs in billions of US dollars; the examples rebuild the article's Company A ($4.5B EV) and Company B ($7.8B EV).
- EV above market cap means debt and preferred stock outweigh cash; EV below it means cash outweighs them.
This applies one common EV formula to your inputs only: it leaves out minority interest, cannot check your figures, and says nothing about whether a company is cheap, healthy or worth buying.
Market cap vs. enterprise value
Market cap measures only equity: what all the shares are worth. Enterprise value (EV) estimates the value of the whole business, including what it owes. The commonly used formula is:
EV = market cap + total debt + preferred stock (+ minority interest) − cash and cash equivalents
Different textbooks and data providers include or leave out preferred stock and minority interest, so check which version a screener uses.
Take two companies, each with a $5B market cap:
| Component | Company A | Company B |
|---|---|---|
| Market cap | $5B | $5B |
| Total debt | $500M | $3B |
| Cash | $1B | $200M |
| Enterprise value | $4.5B | $7.8B |
Company B's enterprise value is about 73% higher, even though the headline market cap is the same. Anyone buying Company B takes on its debt as well as its shares. That is why EV-based multiples such as EV/EBITDA are commonly used to compare companies that are financed differently.
What market cap does not tell you
- Whether a stock is cheap or expensive. That needs earnings, cash flow and growth.
- Financial health. A large market cap can sit on top of heavy debt.
- How easily you can trade. Turnover and order-book depth decide that, not headline size.
- Effects of share buybacks. A buyback reduces the share count and spends company cash. Per-share figures change, but the business itself does not. Look at the share count when you compare market caps across periods.
Market cap at the scale of a whole economy: the Buffett Indicator
The "Buffett Indicator" compares total stock market value with the size of the economy. It comes from a Fortune essay dated 10 December 2001, written by Warren Buffett with Carol Loomis. Buffett described the market value of all publicly traded securities as a percentage of GNP as "probably the best single measure of where valuations stand at any given moment". He also wrote that it "has certain limitations".
He gave two reference points:
- "If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you."
- "If the ratio approaches 200%—as it did in 1999 and a part of 2000—you are playing with fire."
One way to rebuild the ratio uses Federal Reserve data on FRED. For Q2 2026, the Z.1 market value of US nonfinancial corporate equities was about $83.05 trillion. Nominal GDP for the same quarter was $32.56 trillion at a seasonally adjusted annual rate. The ratio comes to roughly 255%.
Published versions differ because they use different equity series and GDP measures. This proxy leaves out financial companies, for example. The 2001 thresholds were written about a different data series, so treat them as context rather than a direct comparison. The indicator is a broad valuation gauge, not a timing signal.
Crypto market cap: same formula, different supply problem
Crypto data aggregators apply the market cap idea to tokens. CoinGecko defines market cap as token price multiplied by circulating supply: the units currently tradable. It defines fully diluted valuation (FDV) as the price multiplied by the maximum supply. CoinGecko notes that reaching FDV can take years, depending on the emission schedule. Other providers calculate FDV from total supply instead, so the same token can show different FDV figures on different sites.
Bitcoin shows the gap. On 25 October 2026, CoinGecko listed a circulating supply of about 20.10 million BTC against a fixed maximum of 21 million. Its market cap and FDV are therefore close.
For many newer tokens, a large share of supply is still locked for teams, investors or treasuries. When those tokens unlock, circulating supply grows. A token can then show a modest market cap next to a much larger FDV. This is the crypto version of the free-float problem: the headline number depends on which units you count. Our guide to Bitcoin's supply covers how circulating and total supply differ.
Quick answers
What is market cap in simple terms? The share price multiplied by the number of shares outstanding: the market's current price tag on all of a company's equity.
What counts as a large-cap stock? FINRA's general guide puts large-cap at $10 billion to $200 billion and mega-cap at $200 billion or more. To be added to the S&P 500, a company currently needs a total market cap of at least US$22.7 billion.
Does a higher market cap mean a better investment? No. Market cap measures size, not value or quality.
Is crypto market cap the same as a stock's? The formula is the same, but it uses circulating token supply. Check FDV and the unlock schedule as well.
Limitations: tier ranges vary by provider, the S&P thresholds are reviewed quarterly, and Buffett Indicator readings depend on the data series used. This article is educational and is not investment advice.
