Welcome to Personal Finance & Money Stack Exchange

Money Stack Exchange is a question and answer site for people who want to be financially literate. It's built and run by you as part of the Stack Exchange network of Q&A sites. With your help, we're working together to build a library of detailed answers to every question about money or personal finance.

We're a little bit different from other sites. Here's how:


Ask questions, get answers, no distractions

This site is all about getting answers. It's not a discussion forum. There's no chit-chat.

Just questions...

...and answers.

up vote

Good answers are voted up and rise to the top.

The best answers show up first so that they are always easy to find.

accept

The person who asked can mark one answer as "accepted".

Accepting doesn't mean it's the best answer, it just means that it worked for the person who asked.

What does it mean for a company to have its market cap larger than the market size?

up vote 14 down vote favorite

Let's say for example, the refrigerator market is sized at 10 million dollars (hypothetical example), if the market cap of a company is, say, 20 million, is it worth investing in the stock? Can it ever happen that a company's market cap exceeds the total market size (or say addressable market size)?

2 Answers

up vote 4 down vote accept

The difference between the two numbers is that the market size of a particular product is expressed as an annual number ($10 million per year, in your example). The market cap of a stock, on the other hand, is a long-term valuation of the company.

up vote 3 down vote

First read mhoran's answer, Then this -

If the company sold nothing but refrigerators, and had 40% market share, that's $4M/yr in sales. If they have a 30% profit margin, $1.2M in profit each year. A P/E of 10 would give a stock value totaling $12M, more than the market size. The numbers are related, of course, but one isn't the maximum of the other.


Get answers to practical, detailed questions

Focus on questions about an actual problem you have faced. Include details about what you have tried and exactly what you are trying to do.

Ask about...

  • Personal investing and asset allocation
  • The financial aspects of homebuying
  • Best practices for saving for retirement, education, and other goals
  • Strategies for creating and sticking to a budget
  • Strategies for earning and saving more money

Not all questions work well in our format. Avoid questions that are primarily opinion-based, or that are likely to generate discussion rather than answers.

Questions that need improvement may be closed until someone fixes them.

Don't ask about...

  • Anything not directly related to Personal Finance and Money
  • Questions that are primarily opinion-based
  • Questions with too many possible answers or that would require an extremely long answer

Tags make it easy to find interesting questions

All questions are tagged with their subject areas. Each can have up to 5 tags, since a question might be related to several subjects.

Click any tag to see a list of questions with that tag, or go to the tag list to browse for topics that interest you.

What does it mean for a company to have its market cap larger than the market size?

up vote 14 down vote

Let's say for example, the refrigerator market is sized at 10 million dollars (hypothetical example), if the market cap of a company is, say, 20 million, is it worth investing in the stock? Can it ever happen that a company's market cap exceeds the total market size (or say addressable market size)?


You earn reputation when people vote on your posts

Your reputation score goes up when others vote up your questions, answers and edits.

+5 question voted up
+10 answer voted up
+15 answer is accepted
+2 edit approved

As you earn reputation, you'll unlock new privileges like the ability to vote, comment, and even edit other people's posts.

Reputation Privilege
15 Vote up
50 Leave comments
125 Vote down (costs 1 rep on answers)

At the highest levels, you'll have access to special moderation tools. You'll be able to work alongside our community moderators to keep the site focused and helpful.

2000 Edit other people's posts
3000 Vote to close, reopen, or migrate questions
10000 Access to moderation tools
see all privileges

Improve posts by editing or commenting

Our goal is to have the best answers to every question, so if you see questions or answers that can be improved, you can edit them.

Use edits to fix mistakes, improve formatting, or clarify the meaning of a post.

Use comments to ask for more information or clarify a question or answer.

You can always comment on your own questions and answers. Once you earn 50 reputation, you can comment on anybody's post.

Remember: we're all here to learn, so be friendly and helpful!

up vote 9 down vote

The difference between the two numbers is that the market size of a particular product is expressed as an annual number ($10 million per year, in your example). The market cap of a stock, on the other hand, is a long-term valuation of the company.

edit

Good point, there is nothing magical about a year. The market size is also $200.000/week. Both rates are not comparable with an absolute number. - MSalters Jun 9 at 9:47

add a comment


Unlock badges for special achievements

Badges are special achievements you earn for participating on the site. They come in three levels: bronze, silver, and gold.

In fact, you can earn a badge just for reading this page:

 Informed Read the entire tour page
 Student First question with score of 1 or more
 Editor First edit
 Good Answer Answer score of 25 or more
 Civic Duty Vote 300 or more times
 Famous Question Question with 10,000 views

see all badges


Sign up to get started

Signing up allows you to:

  • Earn reputation when you help others with questions, answers and edits.
  • Select favorite tags to customize your home page.
  • Claim your first badge:  Informed
Looking for more in-depth information on the site? Visit the Help Center

Personal Finance & Money Stack Exchange is part of the Stack Exchange network

Like this site? Stack Exchange is a network of 157 Q&A sites just like it. Check out the full list of sites.

Stack Exchange