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Companies come in all shapes and sizes.

Market capitalization is one way of looking at the relative size of a company. It’s generally calculated as the stock price multiplied by the total number of outstanding shares.

For example, if a company’s stock is trading at $20 a share, and there are 1,000,000 shares outstanding, then the market cap of that company is $20 million.

Broadly, a small company is defined as one with a market cap between $300 million and $2 billion. A mid-cap company is defined as one between $2 billion and $10 billion. And a large company is defined as one with a market cap larger than $20 billion.

Micro-cap companies would define those below $300 million and mega-cap companies would be those with above $200 billion in market capitalization.

There’s no “official” measurement to denote a “large” company from a “small” one, which means the definitions listed above may differ depending on who you ask.

What’s the mix of large/small companies in the S&P 500?

As of the spring of 2021, the largest cap stock in the S&P 500 (^GSPC) by weighting was Apple (AAPL), at over $2 trillion. The smallest cap stock was a Texas-based petroleum refiner called HollyFrontier Corporation (HFC), with a market cap just short of $6 billion.

That means there are no small cap companies in the S&P 500.

The Russell US Indexes offer more breadth on the universe of publicly traded companies. The Russell 3000 (^RUA) includes the 3,000 largest U.S. traded stocks. That index is then broken up into a Russell 1000 Index (with the 1,000 largest companies) and the Russell 2000 Index (with the remaining 2,000 companies).

The Russell 2000 index (^RUT) therefore includes no mega-cap or large-cap companies, and instead, includes a lot of small cap companies.

Are there other measures of a company’s size?

Yes, companies can be compared by revenue or profits. 

But market cap serves as a useful metric because it evaluates, as the name implies, the market value of a company based on how shareholders are interacting with its stock.

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Because stock prices fluctuate, market cap is a real-time measurement of a company’s worth based on not only its performance — but expectations of future performance.

That means market cap includes a bit of speculation.

An alternative way of looking at a company’s worth without the noise of market pricing is “book value,” which is a company’s net value based on its balance sheet (calculated as its assets minus its liabilities).

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