Market capitalization, commonly referred to as market cap, is a key financial metric used to evaluate the total value of a company's outstanding shares. It represents the public's perception of a company's worth and is calculated by multiplying the current share price by the total number of weighted shares outstanding.
Understanding Market Cap
Market cap serves as a quick measure of a company's size and investment potential. It's widely used by investors to categorize companies into different segments:
- Large-cap: Companies with a market cap of $10 billion or more.
- Mid-cap: Between $2 billion and $10 billion.
- Small-cap: Less than $2 billion.
This classification helps investors align their portfolios with their risk tolerance and investment goals.
How Polygon Calculates Market Cap
Polygon follows the standard market cap formula but incorporates weighted shares outstanding for precision:
Market Cap = Current Share Price × Weighted Shares OutstandingWhat Are Weighted Shares Outstanding?
Weighted shares outstanding account for fluctuations in share count over a reporting period, providing a more accurate representation than a simple shares outstanding figure. This calculation considers:
- Share class shares outstanding: The number of shares issued for each class (e.g., Class A, Class B).
- Par value per share: The nominal value assigned to each share class.
The Weighted Shares Calculation Formula
For a given share class (e.g., Class A), Polygon calculates weighted shares outstanding as:
Weighted Shares (Class A) = ∑(Shares of Class X × Par Value of Class X) / Par Value of Class AThis method ensures comparability across different share structures, such as companies with multiple share classes (e.g., Berkshire Hathaway's BRK.A and BRK.B).
FAQs About Market Cap and Polygon's Methodology
1. Why does Polygon use weighted shares instead of basic shares outstanding?
Weighted shares provide a more accurate reflection of a company's equity structure, especially for firms with complex share classes or frequent stock issuances.
2. Where can I find a company's market cap using Polygon's API?
👉 Access real-time market cap data via Polygon's Ticker Details v3 endpoint.
3. How often is market cap updated?
Market cap is dynamic—it updates continuously with price changes and periodically with shares outstanding adjustments (typically quarterly).
4. Does Polygon adjust historical market cap for corporate actions?
Yes, Polygon's point-in-time data ensures historical metrics reflect actual values at each recorded date, including adjustments for splits or mergers.
5. How does market cap differ from enterprise value?
While market cap measures equity value, enterprise value includes debt and cash, providing a fuller picture of a company's acquisition cost.
Key Takeaways
- Market cap = Share price × Weighted shares outstanding.
- Weighting shares by class and par value ensures accurate valuations.
- Polygon's API delivers real-time and historical market cap data.
- 👉 Explore Polygon's market data solutions for institutional-grade insights.
For further reading on financial metrics, see our guides on P/E ratios and liquidity analysis.