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Related to small-cap: large cap, Large Cap Stocks


A stock with a small capitalization, meaning a total equity value of less than $500 million.

Small-Capitalization Stock

A stock in a publicly-traded company with low amount of market capitalization. In general, a small-cap company has a market capitalization of less than $1 billion or $2 billion, but there is no specific definition. Some brokerages or exchanges have slightly different definitions of small-cap. Some indexes track small-cap companies, as do some exchange traded funds. See also: High-cap, Mid-cap.


1. Of or relating to the common stock of a relatively small firm having little equity and few shares of common stock outstanding. Small-caps tend to be subject to large price fluctuations; therefore, the potential for short-term gains and losses is great.
2. Of or relating to mutual funds that invest in the stock of small-cap companies. See also microcap.
How can I determine whether a small-cap stock is reasonably valued?

A reasonably valued small-cap stock should be a company that has the potential to increase its earnings at a rate higher than the general growth of the economy. Because small-cap stocks generally have unusually high price-earnings ratios, the investor needs to look at each stock individually and compare its price-earnings ratios with the average price-earnings ratio of the appropriate small-cap stock index, such as the Russell 2000.

George Riles, First Vice President and Resident Manager, Merrill Lynch, Albany, GA
References in periodicals archive ?
Table 48: Top 50 Small-Cap North America Independent Exploration and Production (E&P) Companies, Free Cash Flow From Upstream Oil and Gas Operations, $m, 2005-2009 113
dollar and the direction of interest rates have each proved poor indicators of small-cap relative performance.
It looks like 1999 will be yet another disappointment for small-cap aficionados, as a robust economy with little inflation fuels the fast-rising earnings of large-caps, making them hard to beat--especially in recent months.
Investors see that small-cap prices are falling, compared with the growth in large-caps, and start pulling their money out and putting them into big stocks.
The small-cap company that manufactures a private label brand may be forced to lower its price to meet that of its competition.
Contrary to popular belief however, we found that small cap stocks have sub-par earnings growth, and that their excess returns appear to primarily compensate investors for higher risk," says Massimo Santicchia, Equity Analyst with Standard & Poor's Equity Research Services and co-author of the report, Small-Cap Dynamics.
Paul is the fund manager and he has managed this small-cap fund since 2002.
Understanding the dynamics of the small-cap and midcap market rotation allows one to make an informed decision:
Looking ahead, Cotner says she will continue to purchase small-cap companies with above-average earnings growth, being watchful to monitor companies that may be vulnerable to disappointing earnings.
For example, Russell uses the same cut-off point to determine small-cap stocks in the United Kingdom as it does in Panama.