How is market cap calculated?

The formula is: Market Cap = Share Price × Shares Outstanding. The full breakdown is on this page.

Why does market cap matter for value investing?

Market Cap is a general metric documented across Warren Buffett's 50+ years of Berkshire Hathaway shareholder letters and the broader value-investing canon (Graham, Fisher, Lynch, Greenblatt). It feeds into the Buffett-Fit composite score on invest-like - graders apply it consistently across every public stock so you can compare like-for-like.

How is market cap different from enterprise value?

Market Cap and enterprise value are both general metrics - see the linked term for the distinction in mechanics and use. The Buffett-Fit framework on invest-like uses both in the composite score with different pillar weights.

Market Cap - Definition, Formula + Buffett Example

Total market value of a company's outstanding shares - share price times shares outstanding.

What it is

The price the public market is currently putting on the entire equity of a business. Apple at $190/share with 15B shares = $2.85T market cap.

What it is NOT

Market cap is not the cost of buying the whole business. That's enterprise value (market cap + debt − cash). Market cap is just the equity slice.

Market cap is not the company's "size" in any economic sense. Two companies at $10B market cap can have wildly different revenue, employees, profit, and economic footprint.

How it's used

Index inclusion: most major indices (S&P 500, Russell 1000) weight by market cap
Liquidity: larger market cap = more shares trading per day = easier to buy/sell without moving the price
Categorisation:

- Large cap: > $10B (the S&P 500 and similar) - Mid cap: $2B–$10B - Small cap: $300M–$2B - Micro cap: < $300M

Why size affects strategy

Larger companies are studied by hundreds of analysts; mispricings are rarer. Smaller companies are followed by fewer eyes; mispricings are more common but with higher transaction-cost and liquidity drag. Most academic literature on "the value premium" finds it stronger in small-cap territory.

Market Cap

What it is

What it is NOT

How it's used

Why size affects strategy

Related terms

See it on a real stock

Related on invest-like