Valuation
Why a 20p share is not necessarily cheaper than a £20 share
Market capitalisation: the definition
Market capitalisation is the current share price multiplied by the number of shares outstanding. It measures the market value of a company's equity.
What it means
Share price alone does not tell you how large a company is or whether its shares offer value. You also need to know how many shares exist. Market capitalisation is different from the cash in the business and from the value of its assets.
ILLUSTRATIVE EXAMPLE
Company A has one billion shares at 20p each: a £200 million market capitalisation. Company B has five million shares at £20 each: £100 million. The company with the lower share price has the larger equity market value.
What to check
- How many shares are outstanding?
- Does the quoted figure use an up-to-date price and share count?
- What earnings and assets sit behind that market value?
Compare the business and the share count, not just the price of one share.
Sources and review date
Reviewed by Edravo on 6 September 2026.
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