Analysts find it useful to group stocks by their market capitalization, because stocks of the same size tend to have similar characteristics and performance. Market cap is found by multiplying a stock’s share price by the number of shares outstanding – i.e. if IBM was trading at $100 per share, and it had 100 million shares outstanding, its market capitalization would be $10 billion.
In this article, we will examine micro cap stocks. These are companies with market caps below $300 million.
Micro cap stocks take the advantages and disadvantages of small cap stocks to an extreme:
1. High potential growth rates – Like small caps, micro caps are either selling a new product or service, or else they are well-established in a certain region and are looking to expand geographically. Unlike small caps, most micros haven’t started to enjoy fast growth rates. They are still plodding along before they hit critical mass and take off. This means that investors willing to take more of a risk have a chance to jump on-board early, and catch the full move. Continue reading ‘Stock Market Cap Analysis, Part IV – Micro Cap Stocks’ »