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Market cap calculator

By Jude Wallis

Market capitalisation is the share price multiplied by the shares outstanding. A $50 share with 2,000,000 shares outstanding is a market cap of $100,000,000. At $40 with 1,000,000 shares it is $40,000,000.

Market capitalisation

$100,000,000.00

$50.00 times 2,000,000 shares.

Market cap
$100,000,000.00
$

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The formula

market cap=P×N\text{market cap}=P\times N

PP is the share price and NN the shares outstanding. The result is the market value of the equity, which is not the same as the value of the whole business.

A share price on its own means nothing

A $50 share is not expensive and a $40 share is not cheap. Price is value divided by however many pieces the equity was cut into, and the company chose the number of pieces. Only price times count says how big the company is: $100,000,000 against $40,000,000 here.

That is why a stock split changes nothing. Doubling the share count and halving the price leaves the product where it was, which is the clearest possible demonstration that the price alone is not information.

Cap is the equity, not the business

Market cap prices the shares. Anyone buying the whole company also takes on its debt and gets its cash, so the price of the business is market cap plus debt minus cash, which is enterprise value.

The gap between them can be large. Two companies with identical market caps and very different debt loads are not equally sized purchases, and any multiple built on cap alone will say they are. Market cap against enterprise value sets the two out.

Which share count belongs in it

Shares outstanding, not shares issued and not shares authorised. Treasury shares the company has bought back are issued but not outstanding, and counting them overstates the cap.

Free float is a further step down again: the shares actually available to trade, excluding closely held blocks. Index weights often use float rather than the full count, which is why a company's index weight can be smaller than its cap suggests.

What the figure is for

One price, one count, one measure of equity size. It is the denominator in a free cash flow yield, the basis for index weights, and the starting point for enterprise value. Market capitalisation covers the term, and how market capitalisation works covers its uses. This is educational material, not financial advice.

Worked examples

A \$50 share with 2,000,000 shares

The share price is $50 and there are 2,000,000 shares outstanding. What is the market cap?

  1. Multiply price by count: 50×2000000=10000000050 \times 2000000 = 100000000.
  2. That is the market value of the equity.

Market cap is $100,000,000, from a $50 price and 2,000,000 shares.

A lower price and fewer shares

A second company trades at $40 with 1,000,000 shares outstanding.

  1. Multiply: 40×1000000=4000000040 \times 1000000 = 40000000.
  2. A price only 20 percent lower, but a company well under half the size.

Market cap is $40,000,000. The $40 price says nothing about size until it is multiplied by the share count.

Comparing companies by share price

A $50 share and a $40 share tell you nothing about relative size, cheapness or quality. Here the first company is $100,000,000 and the second $40,000,000, and a split at either one would change the price without changing anything real.

Common questions

Does a stock split change market cap?

No. More shares at a proportionally lower price leaves the product unchanged.

Is market cap the price of the company?

It is the price of the equity. Buying the whole business also means taking on its debt and receiving its cash.

Is this financial advice?

No. It is educational material for the price times shares identity.

Keep reading

This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.