Size Matters in Stocks
One of the ways you analyze stocks is to compare key metrics to other stocks of the same size and industry sector. I discuss industrial sectors in the next section of this chapter. Company size is important for two reasons:
• Companies of different sizes behave differently. A company with sales in the tens of billions of dollars and with thousands of employees will not respond to market conditions the same way as a company with 100 employees and a couple of million dollars in sales. If you want to know if the large company is performing well, you compare it to companies of roughly the same size.
• Large companies are less risky. Small companies have a high mortality rate, which makes them more risky than large companies. ...