# Mid-Cap: Definition, Other Sizes, Valuation Limits, and Example

## What Is Mid-Cap?

Mid-cap (or mid-capitalization) is the term that is used to designate companies with a market cap (capitalization)—or market value—between $2 and $10 billion. As the name implies, a mid-cap company falls in the middle between [large-cap](https://www.investopedia.com/terms/l/large-cap.asp) (or big-cap) and [small-cap](https://www.investopedia.com/terms/s/small-cap.asp) companies. Classifications, such as large-cap, mid-cap, and small-cap are approximations of a company's current value; as such, they may change over time.

### Key Takeaways

*   Mid-cap is the term given to companies with a market cap (capitalization)—or market value—between $2 billion and $10 billion.
*   For companies, some of the appealing features of [mid-cap companies](https://www.investopedia.com/top-mid-cap-tech-companies-5235299) are that they are expected to grow and increase profits, market share. and productivity; they are in the middle of their growth curve.
*   Mid-cap stocks are useful in portfolio diversification because they provide a balance of growth and stability.

## Understanding Mid-Cap

There are two main ways a company can raise capital when it's needed: through debt or [equity](https://www.investopedia.com/terms/e/equity.asp). Debt must be paid back but can generally be borrowed at a lower rate than equity (due to tax advantages). Equity may cost more, but it does not need to be paid back in times of crisis. As a result, companies strive to strike a balance between debt and equity. This balance is referred to as a firm's [capital structure](https://www.investopedia.com/terms/c/capitalstructure.asp). Capital structure, especially equity capital structure, can tell investors a lot about the growth prospects for a company.

One way to gain insight about a company's capital structure and [market depth](https://www.investopedia.com/terms/m/marketdepth.asp) is by calculating its [market capitalization](https://www.investopedia.com/terms/m/marketcapitalization.asp). Companies with low market capitalization, also referred to as small-caps, have $2 billion or less in market capitalization. Large-capitalization firms have over $10 billion in market capitalization, and mid-cap firms fall somewhere in between these two categories (ranging from $2 billion to $10 billion in market capitalization). Additional categories such as mega-cap (over $200 billion), micro-cap ($50 million to $500 million) and nano-cap (less than $50 million) have been added to the spectrum of market capitalization for the sake of clarity.

[For investors](https://www.investopedia.com/mid-cap-investing-strategies-5225553), a mid-cap company may be appealing because they are expected to grow and increase in profits, market share, and productivity; they are in the middle of their growth curve. Since they are still considered to be in a growth stage, they are deemed to be less risky than small-caps, but [more risky than large-caps](https://www.investopedia.com/mid-cap-long-term-returns-5225971). Successful mid-cap companies run the risk of seeing their market capitalization rise, mainly due to an increase in their share prices, to the point where they fall out of the 'mid-cap' category.

While a company's market cap depends on [market price](https://www.investopedia.com/terms/m/market-price.asp), a company with a stock priced above $10 is not necessarily a mid-cap stock. To calculate market capitalization, [analysts](https://www.investopedia.com/terms/a/analyst.asp) multiply the current market price by the current number of shares outstanding. For example, if company A has 10 billion shares outstanding at a price of $1, it has a market capitalization of $10 billion. If company B has one billion shares outstanding at a price of $5, company B has a market capitalization of $5 billion. Even though company A has a lower stock price, it has a higher market capitalization than company B. Company B may have the higher stock price, but it has one-tenth of the shares outstanding.

## Advantages of Mid-Caps

Most [financial advisors](https://www.investopedia.com/terms/f/financial-advisor.asp) suggest that the key to minimizing risk is a well-diversified portfolio; investors should have a mix of small-, mid- and large-cap stocks. However, some investors see mid-cap stocks as a way to diversify risk, as well. Small-cap stocks offer the most growth potential, but that growth comes with the most risk. Large-cap stocks offer the most stability, but they offer lower growth prospects. Mid-cap stocks represent a hybrid of the two, providing a balance of growth and stability.

No one can accurately predict when the market will favor a specific kind of company, whether it’s a large-, mid- or small-cap. So it’s important to diversify your [portfolio](https://www.investopedia.com/terms/p/portfolio.asp), as we mentioned above. But the percentage of mid-caps that you’ll want to invest in depends on your specific goals and [risk tolerance](https://www.investopedia.com/terms/r/risktolerance.asp).

However, there are many [advantages to mid-cap companies](https://www.investopedia.com/mid-cap-companies-advantages-and-disadvantages-5224695) that investors may want to consider. When interest rates are low and capital is cheap, corporate growth is generally stable. Mid-cap companies typically can get the credit they need in order to grow, and they do well during the expansion part of the business cycle.

Mid-caps are not as risky as small-cap companies, which means they tend to do relatively well financially during times of economic turbulence. In addition, many mid-caps are well known, are often focused on one specific business, and have been around long enough to make a niche in their [target market](https://www.investopedia.com/sector-concentration-of-top-mid-cap-etfs-5225884). And finally, because they are riskier than large caps, they may have a higher return, which could be more appealing to a less risk averse investor's bottom line. 

Investor's can either buy a mid-cap company's stock directly or buy a mid-cap [mutual fund](https://www.investopedia.com/terms/m/mutualfund.asp)—an investment vehicle that [focuses on mid-cap companies](https://www.investopedia.com/articles/investing/011116/4-best-us-midcap-index-mutual-funds.asp).