Market Value Calculator

The market cap calculator is used to determine the value of a company's stock on the public market. In corporate finance, the market capitalization of a stock is also referred to as its market cap and is essentially the product of the share price and number of shares outstanding.

This tool can also work in reverse. If you enter the stock price and number of shares outstanding, it will give you the market cap. Conversely, if you input the market cap or either of the other two values, it will calculate the missing value for you. You can then compare this market value to an estimate of intrinsic value, use it as a way to evaluate the company, or compare it to book value.

What is a stock's market value?

The market cap of a stock is the price that the market has achieved for all common shares of a company. It reflects the last price that investors have paid for a share and it's calculated based on the total number of diluted shares issued by the company.

Book value is a purely theoretical figure recorded on the balance sheet, while market value is forward-looking. It fluctuates from day to day depending on investor sentiment, earnings forecasts, interest rates and general economic outlook. For publicly traded companies, you can see their share price directly on an exchange site so that you can track their market cap in real time.

Formula for calculating market value:

The basic relationship is a simple product.

By rearranging the same formula one can determine the number of shares that are implied by a market price per share or valuation.

Use the diluted outstanding shares and consider the impact of options, convertible bonds, and other rights. Analysts typically estimate this number using the treasury method.

Example:

Say a company's last closing price is $18.00 and a discounted cash flow model estimates the value of its stock at $20 billion. If that company has one billion diluted outstanding shares, then the share price would be $20.00. This is because 20 billion divided by one billion equals $20.00.

The market price of $18.00 represents a discount of 10 percent, and the implied value is $20.00. Under this assumption, the stock appears undervalued. Conversely, multiplying $20.00 by one billion shares gives the original equity value of $20 billion.

Book value and market value

The book value of a share is the historical, balance-sheet value of equity and roughly corresponds to what common shareholders would receive after assets are sold and debts paid. The market value, by contrast, is the price at which buyers and sellers actually agree today.

In most cases the two values are not equal. For most healthy companies, market value is significantly higher than book value. This is because the market takes into account future earnings, brand value and growth potential that are not captured on the balance sheet. The price to book ratio (P/B) is the ratio of one value to the other. If this number is greater than 1, it indicates that the market expects the company's earning power to exceed the values shown in equity.

From stock price to company value

Market capitalization measures only the equity portion of a company. Enterprise value, on the other hand, includes the entire company and takes into account net debt. Net debt is the amount of debt that a buyer would take on minus any cash received.

Looking at enterprise value allows you to understand how stock price, debt and cash affect the overall worth of a company and what that value looks like compared to just the stock price.

When market value estimates are useful:

Investors use the market cap to judge whether a stock is under- or overvalued based on their own estimates. Founders and owners use it to determine the size of funding rounds or sales deals. Analysts use it as a starting point for calculating enterprise value, valuation metrics, and index weights.

Because unlisted companies do not have publicly available share prices, the market value has to be estimated based on price-earnings ratios, comparable transactions or the asset-based method and cannot be directly taken from a stock exchange.

This calculator is for educational and planning purposes only and does not constitute investment advice. Market prices are constantly changing and the valuation depends on your assumptions. Please consult a qualified professional before taking action based on these numbers.