Capitalization Analysis

Our first step is determining how big the company is. The company’s market capitalization says a lot about how volatile the stock is likely to be, how broad the ownership might be and the potential size of the company’s end markets. For example, large cap and mega cap companies tend to have more stable revenue streams and a large more diverse investor base, both of which generally equate to less volatility. Mid cap and small cap companies, meanwhile, may only serve single areas of the market, and may have more fluctuations in their stock price, valuation, and earnings.  We start to examine revenue and profit figures because the market cap will provide important perspective.