Market capitalization, or market cap, is a measure of a company's size. It is calculated by multiplying a company's current stock price by the number of its outstanding or floating shares. A company with a current market value of $20 per share that has 100 million outstanding shares would have a market cap of $2 billion.
Companies of different sizes come with varying strengths and risks. What are known as large-cap companies, or those with a market value of at least $5 billion, are generally stable, well-established corporations. Small-cap companies, or those with a market value of less than $1.5 billion, are generally considered to have greater growth potential, but at the same time, their stock prices tend to be more volatile.
Sharing characteristics of both large- and small-cap companies, mid-cap companies offer investors a balance combining growth potential with anticipated stability.
While the market values that define large-cap, mid-cap and small-cap stocks are generally similar, research firms and index providers often use slightly differing market cap levels to define each category.
The categories of market cap used by Scottrade on its stock screener tool are micro cap (less than $300 million), small cap ($300 million to $2 billion), mid cap ($2 billion to $10 billion), large cap ($10 billion to $200 billion) and mega cap (greater than $200 billion).