Besides many other thinks, absolutely , a size of company does matter. Some of the investors limit their investment to various size companies, where as some investors spread their capital across the size range
When you are evaluating a stock , size of company is only one part to consider, however it is very important for you because a reaction of small and large companies in the market is not same.
I would take an opportunity to define the size of company before moving further. A company could be classified in two ways:
• Market Cap
The majority of the people does not use revenue on account of differences in industries disfigure that how big or small size of the company is based only on revenue.
For measuring size of a company, market cap or market capitalization is a standard tool. You can calculate market capitalization by multiplying the quantity of shares by the recent stock price.
For instance, if a company has a stock of (100,000,000) common shares and current share price is $55 a share, its market capitalization would be 100000000 x 55 = ( 5.5 ) billion dollars.
By this calculation you can do an ‘apples to apples’evalution of two or more than two companies.
Finding Market Capitilization
You can locate the market capitalization of any stock that was reported on most of the quotes. You can locate it on the internet like” Yahoo! Finance”. You just enter a symbol of any stock , market capitalization would be between the data reported.
Some Investors classify companies by market capitalization and put them under the one category of below mentioned labels, while there is no any common agreement on the precise cutoff.
• Micro capitalization $300 million & under
• Small capitalization $1 billion & under
• Mid Capitilization $8 to $ o1 billion
• Large capitalization $100 $08 billions
• Mega Capapitilization Over $100 billions
These are totally arbitrary and you can see other rankings somewhere else. Most of the people just use three: large, mid and small. I would prefer all five that were mentioned above , on the basis of high and low limits.
Mega cap category possesses the Wal Marts and Microsofts , where as Micro Cap category have had the name one.
If you are investing in the small cap or micro markets wait for volatility and failure. The numbers $300million-$1 billion might sound impressive, but very little .
Simultaneously, Wal Mart and Microsoft were both small companies .They could have gone under easily. At the time there was a big risk in the small cap and micro market.
However it must be wrong to consider that the survival of a company is guaranteed by its size.
On the other hand it can help you if could be comparatively a big fish, if you want to do swimming in the large pond. Though undersized companies are risky for investment point of view , but can return you big rewards.