Most Beginning Investors Ignore Market Cap. That's a Costly Mistake.
Many people starting out in investing may look at a stock's share price and assume that this number can tell them whether a stock is large or small and whether it is cheap or expensive. However, in actuality, that is far from the case. While the question of whether a stock is cheap or expensive can be subjective and based on numerous valuation and growth metrics, determining whether a stock is big or small is primarily a matter of assessing its market capitalization (market cap). Market cap represents the market value of a company's equity. Want to know how to calculate the market value of a firm's equity ? Take the stock price and multiply it by the number of shares outstanding. Market cap is far from the only metric one should consider before investing in a stock, but assessing market cap can give you a high-level view of a company's size and its realistic long-term upside potential before considering other factors. Continue reading