- Valuation Basics
- Enterprise Value
- Enterprise Value Formula
- Equity Value
- Equity Value Formula
- Market Capitalization
- Market Capitalization Formula
- Internal Growth Rate Formula
- Intrinsic Value Formula
- Absolute Valuation Formula
- Assessed Value vs Market Value
- Required Rate of Return Formula
- Historical Cost vs Fair Value
- Large Cap vs Small Cap
- Free Float Market Capitalization
- Market Cap vs Enterprise Value
- Book Value Vs Market Value
- Value vs Growth Stocks
- Book Value Per share
- Fair value vs Market value
- Discounted Cash Flows (39+)
- Valuation Multiples (17+)
- Other Valuation Tools (3+)
- Valuation Interview Prep (5+)
Large Cap vs Small Cap Differences
- Large Cap Companies have market capitalization more than USD 10 billion. The percentage of failure of large capitalization companies is very small when compared with small capitalization companies. Large capitalization companies lie on top of the market capitalization spectrum.
- Small Cap Companies have a market capitalization of USD 2 billion or less. The stock price of the company’s share does not decide whether the company is a large cap or small cap. For example, if a company A stock price is USD 50 and company B stock price is USD 20, so it does not mean company A is a large cap.
If company A has 100 million shares, so the total market capitalization of company A is USD 5 billion, on the other hand, company B has 500 million shares so the market cap of company B is USD 12 billion. Small capitalization companies lie on the bottom of the market capitalization spectrum.
Large Cap vs Small Cap Infographics
Here we provide you with the top 9 difference between Large Cap vs Small Cap
Large Cap vs Small Cap Key Differences
The followings are the key differences between Large Cap vs Small Cap:
- Large capitalization companies are less volatile and hence are less risky to invest. Hence, investments in these companies are appropriate for a risk-averse Whereas, small capitalization companies are highly volatile therefore are more risky to invest and therefore these are more suitable to risk-seeking investors.
- Large capitalization companies are the companies which have market capitalization more than USD 10 billion. Small capitalization companies are the companies which have a market capitalization less than USD 2 billion.
- Small Capitalization stocks have the ability to give a higher return but when there is a market downfall these stocks fall higher than the Large capitalization. On the other hand, Large capitalization companies stocks provide mediocre returns in the bull markets but are not hit as hard when compared to large-cap stocks.
- Large capitalization companies are big organizations and have strong balance sheets. They are usually strong in terms of financial strength and focus on high growth segments. On the other hand, Small capitalization companies financial strength is not that strong, hence are unable to invest in highly growing segments.
- Large capitalization companies stocks have enough cash on hand and are stable. Hence, it is easier in buying shares in bulk or selling shares as per the price of the investors wish. Small companies are less liquid and are also growing hence they wish to invest in their own company. In this, they face difficulty in buying shares in bulk and also selling them at the price of the investor’s choice.
- Examples of Large capitalization companies in the Indian market are Infosys, TCS, Tech Mahindra, Wipro, Reliance. Small capitalization companies in the Indian market are Kriti industries, Vikas Ecotech, Sintex industries etc
- Information regarding these companies is readily available. These companies publish newsletters, annual review documents as well as media houses. Information on small capitalization companies may be available but not as detailed as the Large capitalization companies
- Large capitalization companies lie on top of the market capitalization spectrum. Small capitalization companies lie on the bottom of the market capitalization spectrum.
Large Cap vs Small Cap Head to Head Differences
Let’s now look at the head to head difference Large Cap vs Small Cap
|Basis||Large Cap||Small Cap|
|Meaning||This company have a market capitalization of more than USD 10 billion.||This company have a market capitalization of less than USD 2 billion.|
|Definition||It lies on top of the market capitalization spectrum||It lies on the bottom of the market capitalization spectrum|
|Risk||Less risk in terms of the failure of the company, hence the risk of investment in these companies is less.||These companies are more volatile, hence are more risky for investment in shares of than large capitalization companies.|
|Suitability||Usually investing in shares of large capitalization companies is suitable for the investors who are looking for safe investment for the long term with less risk.||Investors looking for a higher return in short interval with higher risk, look forward to investing in these companies.|
|Liquidity||These stocks are easier in buying shares in bulk or selling shares as per the price of the investors wish.||These companies are less liquid, i.e. they face difficulty in buying shares in bulk and also selling them at the price of the investor’s choice.|
|Dividend||These companies are capable of generating a good amount of dividend.||These companies face a problem to generate a good amount of dividend when compared to large capitalization companies.|
|Example of Companies||Samsung, LG Display, Sony, Reliance, Wipro, Infosys||JOLED, Universal Display Corporation, Decawave|
|Strength||These companies are usually strong in terms of financial strength and focus on high growth segments.||These companies financial strength is not that strong, hence are unable to invest in highly growing segments.|
|Data||Information regarding these companies is readily available. These companies publish newsletters, annual review documents as well as media houses||Information on small capitalization companies may be available but not as detailed as the large capitalization companies|
The investor must conduct thorough research of the company he is looking to invest in before they look to invest in it. Following are a few key pointers that an investor should look at before investing in any company either small capitalization or large capitalization. The most important point to consider is the short and long term plans of the company, its revenue model, the profitability of the company, whether the company has invested in anything apart from its business, goodwill of its key promoters, and the financial strength to stand on in difficult times.
This has been a guide to Large Cap vs Small Cap. Here we also discuss the top differences between Large and Small Cap along with infographics and comparison table. You may also have a look at the following articles –