Small Cap Stocks

Small Business Looking Up

Small cap refers to stocks with a market capitalization in the range of $200 million to $2.5 billion. Market capitalization determined from the share price and the number of shares outstanding. If you multiply these two numbers, you will get the market cap (market capitalization).

One assumption is that small cap stocks have great growth potential. Some of the larger well-know stocks were once small cap stocks. The small amount of capitalization leaves them a lot of room to grow. Bigger companies cannot grow at the same rate percentage because they would become too huge to sustain, for example, if Amazon quadrupled in size. On other hand, a small cap company can quadruple its size and still have room to grow.

 

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