Market Value vs. Market Capitalization
Market value represents the stock price of a publicly traded company. It changes frequently based on the number of shares bought and sold by investors. Market capitalization is a broader illustration of a company's value, and it changes in part based on market value. Investors can learn where the markets are valuing a stock with market value and can learn even more about how a company fares in comparison with competitors by viewing market capitalization.
Market value is an entry point into learning a company's worth. It is a stock price for each individual share that is available in the public markets for investors to buy and sell. Market value is linked to a company's trading symbol that is associated with the exchange where the stock trades. Market value changes based on supply of shares and investor demand. It is displayed as a price alongside any upward or downward change based on the stock's closing price in the previous trading session.
Market capitalization, which may also be referred to as market cap, represents how much a company is worth in the publicly traded markets. It illustrates the value at which investors are placing on a company at a given time. Market cap can be calculated by multiplying a stock's market value by the number of shares that a company has outstanding, the latter of which are common stock shares that have been issued for trading in the public markets.
Participants in the financial markets group companies based on market cap size. While there are variations on the scale, the smallest of companies generally have a market cap of less than $1 billion, according to USA Today. These stocks have the potential to deliver fast and high returns because they have a lot of room to grow, but because of their size they are also deemed risky. Large cap stocks, which are worth more than $8 billion in market cap, according to Fidelity Investments, typically do not produce quick and lofty profits, but they are among the most stable investments given their size and proven history.
A company's market value is not always a fair representation of where the stock should trade. Financial analysts will often assign a price target to a company that reflects their opinion of where a stock is fairly valued, and it might influence investors to buy, sell or hold a stock. The price target might be higher or lower than a stock's actual market value as it represents where an investment professional believes the stock is heading based on the fundamentals of a business.
Geri Terzo is a business writer with more than 15 years of experience on Wall Street. Throughout her career, she has contributed to the two major cable business networks in segment production and chief-booking capacities and has reported for several major trade publications including "IDD Magazine," "Infrastructure Investor" and MandateWire of the "Financial Times." She works as a journalist who has contributed to The Motley Fool and InvestorPlace. Terzo is a graduate of Campbell University, where she earned a Bachelor of Arts in mass communication.