You can find a company's total valuation, or market capitalization, by multiplying its stock price by its number of outstanding shares. For example, if a company's share price is $100 and it has 1 million outstanding shares, its market cap is $100 million. In terms of size, companies fall into three categories: small cap, mid cap, and large cap.

A small-cap company has a market cap of between $300 million and $2 billion, a mid-cap's is $2 billion to $10 billion, and a large-cap's is more than $10 billion. Investing in small-cap stocks carries risk, leading some to wonder whether to invest in them at all. Simply put, the answer is yes.

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Source Fool.com