Market Capitalization Divisions

• The stock market divides company market capitalizations into large, mid, small and micro capitalized companies. Companies with large capitalization have more than $5 billion in outstanding stock shares, while mid companies have between $1 billion and $5 billion, small companies have between $200 million and $1 billion, and micro companies have less than $200 million in capitalization.
  
  

Market Capitalization to Book

• There are financial ratios that use market capitalization for calculation. As an example, price-to-book value is the market capitalization rate divided by the book value of stock as held on the company balance sheet. Stock analysts may use this ratio in an attempt to locate undervalued companies, since analysts view any ratio under 1 as low.
  
  

Market Capitalization to Sales

• Another useful ratio that uses market capitalization is the price-to-sales ratio. Price-to-sales calculates as the market capitalization divided by the total company revenue over the previous 12 month period. Typically, a low ratio means an attractive stock investment.
  
  

Example

• Walmart is a large capitalized, well-known company. At the time of publication, Walmart has a market capitalization of $186 billion, a price-to-sales ratio of 0.44 and a price-to-book ratio of 2.75. For Walmart, the price-to-sales is low but the price-to-book is high. These ratios indicate that the sales growth numbers are fine, but the company is possibly overvalued. Since these ratios conflict, more research into the company should be undertaken by an investor interested in purchasing its stock.