![\"Price](\"https:\/\/i0.wp.com\/www.stockcalc.com\/blog\/BrianD\/wp-content\/uploads\/sites\/15\/2015\/10\/dreamstime_s_18168934.jpg?ssl=1\")
<\/a>Side note: Here is an overview of Price vs Market cap from Khan Academy:<\/p>\n
https:\/\/www.khanacademy.org\/video\/price-and-market-capitalization<\/a><\/em><\/p>\n In some sectors, notably junior mining companies, you need to look at Market Cap (Stock Price * Number of Shares outstanding) instead of share price as a potential upside if conditions return.\u00a0 Every time one of these junior companies does a reverse split it affects the market cap but may not be reflected in the price over time given their nature to fall off dramatically in tough times.<\/p>\n As a note, any company that goes through a reverse split falls for this math so if you think of buying a company because it “used to be a 6$ stock” please look to see if any reverse splits have occurred.<\/p>\n Here is a example of a small Canadian junior gold company that I ran using the www.stockcalc.com<\/a>\u00a0 website – It hit a high of 12 Million market cap in 2008 and the adjusted stock price at that time was in the 1.20$ range (I say adjusted because as each reverse split occurs in order to have apples and apples the charts need to be adjusted to reflect the splits)<\/p>\n The company is currently trading at 13 cents with a market cap of less than 3.5 million.<\/p>\n Market Cap<\/p>\n Let look at 3 points in time here with the share consolidations accounted for:<\/p>\n Jan 1 2010: Market Cap 5.5 Million, Price 57 cents From these we can calculate the (adjusted) # of shares as 10 Million each of 2010, 2014 and 26 Million in 2015. \u00a0The company did a reverse split mid 2014 followed by a number of private placements.<\/p>\n Price – This chart shows the adjusted close prices for the company from 2008 to mid 2015.<\/p>\n Here is a zoomed in version of the price chart<\/p>\n So if we wanted to speculate thinking conditions were going to turn around for this junior mining company, how high could the share price go based on historical values?<\/p>\n If we look at the price chart we see the company would have been in the 50 to 60 cent range during 2010-2011 and may speculate it could return there if gold prices reverse higher. This would be a 4-5 times return compared to the 13 cents currently.<\/p>\n Conversely if we look at Market Cap: \u00a0after the split Market Cap was 3.4 million. To return to the 5.5 million range we see a \u00a060% return.<\/p>\n i.e if the company returned to full value as expressed by 2010-11 market cap it would only rise to\u00a0 21 cents, not the 50 to 60 cent range it had seen previously.<\/p>\n Yes it is intuitive, just something to keep on your radar when looking at these smaller stocks.<\/p>\n <\/p>\n If you want to explore the Stockcalc <\/a>software simply create an account at www.stockcalc.com<\/a> and have a look around.\u00a0 Use the walk-throughs (click the walking man icon), videos (video icon on each page) or the help menu to help understand and navigate the site.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Checking Price versus Market Cap I often see on chat rooms and bullboards investors discussing small caps with phrases like\u00a0“but it used to be a 6 $ stock – I’ll buy it and wait for it to get back there” Should\u00a0they be looking at Price or Market Cap? Side note: Here is an overview of … Continue reading It used to be a 6$ stock\u2026<\/span> <\/a><\/p>\n
\nJan 1 2014: Market Cap 1.0 Million, Price 10 cents
\nJan 1 2015: Market Cap 3.4 Million, Price 13 cents<\/p>\n<\/a><\/p>\n<\/a><\/p>\n