Educational material from 
What you will learn
- Calculate market cap as price times outstanding shares.
- Distinguish your holding's value from the company's market cap.
- Explain why a low price per share does not establish a cheap valuation.
Calculating market cap needs two numbers
For a simplified company with one share class, market cap = price per share × total outstanding shares. A price of SEK 40 and 2 million shares give a market cap of SEK 80 million. Check that the figures refer to the same point in time.
Do not confuse outstanding shares with the number that changed hands during the day. Shares traded describe trading volume. Outstanding shares describe the shares that exist in the company. For a company with multiple share classes, you may need to calculate each class's market value separately.
The lower share price can produce the larger market cap
Our fictional companies Ljus and Stig have different share counts. Ljus costs more per share, but has fewer shares. Multiply before comparing. The names and prices in the table are invented for this exercise and do not identify actual investments.
Stig's market cap is twice Ljus's market cap, even though its share price is one fifth as high. Sorting a share list by price per share would therefore produce a different order from sorting the companies by market cap.
If the table does not fit, scroll it sideways.
| Company | Share price | Outstanding shares | Market cap |
|---|---|---|---|
| Ljus | SEK 100 | 1 million | SEK 100 million |
| Stig | SEK 20 | 10 million | SEK 200 million |
Your holding is one part of the company
Ten shares in Ljus are worth 10 × 100 = SEK 1,000 in the table's scenario. That is your holding value, not the company's market cap. Your ownership fraction is 10 ÷ 1,000,000 = 0.001 percent, assuming each share represents an equal share of the capital.
If Ljus's price changes to SEK 90 and its total share count stays unchanged, market cap becomes SEK 90 million. Your holding becomes worth SEK 900. Both monetary values change, but your ownership fraction remains the same fraction of the share count.
Company size and valuation are different questions
Market cap describes the shares' market value at the chosen time. It does not calculate the company's bank balance or what someone would certainly pay for the whole business. Debts, assets, results and expectations require other information.
When following a company in an exercise, record what each number actually measures. Investiq's product guide explains the context of market data. This lesson helps you interpret the concepts; it does not say the app displays every valuation measure or tell you which company to choose.
Try it yourself
Company M has 4 million shares at SEK 30 each. Company N has 1 million shares at SEK 80 each. Which has the larger market cap, and by how much?
Show the solution and explanation
M: SEK 120 million. N: SEK 80 million. M is SEK 40 million larger.
Multiply outstanding shares by price in each company. M's share price is lower, but its larger share count produces the higher total market value.
Check your understanding
Can you calculate market cap from share price alone?
No. You also need the outstanding share count and the relevant time. The price of a single share is insufficient.
Does a lower share price establish a more attractive valuation?
No. The price of one unit depends on how many shares divide the company. It does not establish whether the price is reasonable relative to the business.
Practise with virtual money
Try what you just learned in a practice portfolio with virtual money. You don't deposit any real money.
How the practice portfolio worksKeep learning and practising
More lessons on this topic
Prices, company events and currency
Sources and examples
The sources support the factual explanations. Calculations and exercises were created for this lesson. Amounts and price changes are invented unless stated otherwise.
This material is educational and does not recommend securities to buy. A simulated result does not guarantee a future result.
