The term “cap”, as in small-cap, mid-cap, and large-cap. Cap is short for capitalization. As a stock market term, the capitalization of a company is found by multiplying the total number of shares times the current share price.
If a company has 500 million shares trading at $20 a share, its market cap is $10 billion (500,000,000 x $20). This is the total value of the company’s stock, the value that the world of stock market investors has placed on the company (at least for today, investors are quick to change their minds).
Today, we define a large-cap company as one whose stock is valued at over $10 billion, a mid-cap from $1 to $10 billion, a small-cap from $250 million to $1 billion, and a company whose stock value is under $250 million as a micro-cap. Depending on who you listen to or how old your reference is, these definitions will vary.
A related point – don’t think a company is big just because it has a high stock price, or that it is small just because its stock price is low.
For example, Disney trading at $23 is not smaller than Barnes & Noble trading at $33, since Disney has 2,048,690,000 shares outstanding (called the “float”) and B&N has just 68,585,000 shares. That’s a $4.7 billion market cap for Disney versus only $226 million for Barnes & Noble.