What does a company’s market capitalization measure?

A company’s market capitalization measures its share price multiplied by shares outstanding.

This formula estimates the total market value of a publicly traded company’s equity. For example, a company with one billion shares trading at $50 per share has a market capitalization of $50 billion.

Market capitalization is widely used to compare the sizes of companies, including the world’s richest companies by market value. It changes whenever the share price changes and can also change when a company issues or repurchases shares.

Market cap is not the same as revenue, profit, cash, or enterprise value. Revenue measures sales over a period, profit measures earnings after costs, and enterprise value includes debt and subtracts cash. Analysts therefore use market cap as one valuation measure rather than a complete description of a company’s financial strength.