Watch: Market Capitalization Explained— Stock Market Investing

Market capitalization is an indicator of how valuable a company is based on its share price.

What is market capitalization? Market capitalization (market cap) helps us measure the value and size of a company by multiplying its total number of outstanding shares by its stock price.

The price of the stock does not matter because it’s arbitrary; it can be anything at any given time. It doesn’t tell you how valuable the company is.