There's a common misconception that per-share price is as important as market cap when it comes to investing in a stock, but this is incorrect.

With this overview, learn why market cap should be your key consideration when evaluating a stock because it tells you the value of a company. The per-share price of a stock is thought to convey some sense of value relative to other stocks.

In fact, except for its use in some calculations, the per-share price is virtually meaningless to investors doing fundamental analysis. For that figure, we need the market capitalization or market cap number.

Why Market Cap Is More Important Than Per-Share Price

This number gives you the total value of the company or, stated another way, what it would cost to buy the whole company on the open market. This is how you should look at these two companies for evaluation purposes.

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Their per-share prices tell you nothing by themselves. What does market cap tell you?

Market capitalization - Wikipedia

First, it gives you a starting place for evaluation. For example, how does the company compare to others of a similar size in the same industry?

Some analysts use different numbers and others add micro caps and mega caps. You will also use market cap in your screens when looking for a certain size company to balance your portfolio.

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Stocks Evaluating Stocks Trading Basics Understanding Stocks Retail Stocks Active Stock Trading. Updated April 03, What You Can Learn From Market Cap What does market cap tell you?

The market generally classifies stocks into three categories: Get Daily Money Tips to Your Inbox Email Address Sign Up.

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