Our free Excel resource provides step-by-step guidance on determining the total market value of a firm’s outstanding equity shares. The template will also walk through the process for companies with multiple share classes trading at different prices, showing how to calculate the overall market cap while handling complex capital structures. Our free Excel resource provides step-by-step guidance on determining the total market value of a firm’s outstanding equity shares. The template will also walk through the process for companies with multiple share classes trading at different prices, showing how to calculate the overall market cap while handling complex capital structures.
What is Market Capitalization?
Market capitalization, also known as market cap, represents the total market value of a company’s outstanding shares (or stock). It is calculated by multiplying a company’s current share price by its total number of outstanding shares (or diluted shares). Market cap is considered to reflect the public market’s view of a company’s stock value and by extension, its perceived to be the company’s overall equity value.
Download the Free Market Capitalization Template
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Market Capitalization Formula
The formula for calculating market capitalization
It’s important to use the diluted number of shares outstanding rather than the basic number. Diluted shares account for all outstanding stock options, restricted stock units, convertible securities, and other instruments that could potentially increase the total shares in the future if exercised.
Details on stock options, restricted stock units and convertible securities can all be found in the company’s annual report or 10K filing. The most recently filed reports should disclose the current basic and diluted share count along with any multiple share classes.
Steps for Using the Market Capitalization Template
- Download the Market Capitalization template
- For companies with a single class of common stock like Bilbao Inc., input the current share price (e.g. $9.00) and number of diluted shares outstanding (e.g. 1,026,430) into the blue cells
- The template will automatically calculate the market capitalization by multiplying the share price and diluted share count
- For companies with multiple share classes like Santander Inc., input the share prices for each class (e.g. $4.00) along with the respective shares outstanding for Common A (962,540) and Common B (53,600)
- Sum the share counts across all classes and multiply by the share price to get the market cap
- Exclude any preferred shares, ADRs, or other non-common equity instruments from the share counts
- Review the calculated market capitalization figure, which represents the total market value of the company’s outstanding equity
- Use the market cap figure for comparisons to peers, analyzing historical trends, or as an input into valuation multiples