- 1Market Cap = Stock Price × Total Shares Outstanding
- 2Categories: mega ($200B+), large ($10–200B), mid ($2–10B), small ($300M–2B), micro (under $300M)
- 3Smaller companies historically return more but with higher risk
- 4Most index funds are market-cap weighted — the biggest stocks dominate
- 5Market cap is not the same as company value (enterprise value includes debt)
#What Is Market Cap?
Market capitalization is the total dollar value the stock market places on a company's equity.
Market Cap = Current Share Price × Total Shares Outstanding
If a company has 1 billion shares at $150 each, its market cap is $150 billion.
#Size Categories
| Category | Market Cap Range | Examples |
|---|---|---|
| Mega-cap | $200B+ | Apple, Microsoft, Nvidia |
| Large-cap | $10B – $200B | Most S&P 500 stocks |
| Mid-cap | $2B – $10B | S&P 400 stocks |
| Small-cap | $300M – $2B | Russell 2000 stocks |
| Micro-cap | Under $300M | OTC and small exchange stocks |
#Size and Returns
Academic research (Fama & French, 1992) found that smaller companies tend to deliver higher returns over long periods:
| Period | Large-Cap (annualized) | Small-Cap (annualized) | Difference |
|---|---|---|---|
| 1927–2024 | ~10.3% | ~11.8% | +1.5% |
But the "size premium" comes with significantly more volatility, less liquidity, and higher transaction costs. It's also been inconsistent in recent decades.
#Why Market Cap Matters
Index Composition
The S&P 500 is market-cap weighted. Apple (~$3.5T) has roughly 700x more influence than the smallest S&P 500 stock.
Liquidity
Larger companies trade more shares daily, meaning tighter bid-ask spreads and lower transaction costs.
Analyst Coverage
Mega-caps may have 30+ analysts; micro-caps may have zero. Less coverage can mean more mispricing — an opportunity for factor-based investors.
Risk Profile
Larger companies typically have more diversified revenue, stronger balance sheets, and lower bankruptcy risk.
#Market Cap vs. Enterprise Value
Market cap only measures equity. Enterprise value (EV) includes debt and subtracts cash:
EV = Market Cap + Total Debt - Cash
For valuation purposes, EV is more accurate because it represents the full cost to acquire a company.
#Our Coverage Universe
We rank approximately 3,000+ U.S. stocks across all size categories, but our rankings work best for liquid mid- and large-cap stocks where factor data is most reliable.
Last updated: February 5, 2026