In our last article, we presented a history and chart on the largest companies in America over the past three decades. In this issue, we take a look at another interesting measure, the twenty most valuable American companies over the same time span, based on the annual Fortune 500 list. In the paragraphs below, we take a look at how this measure has changed over time. And this measure certainly does change – as shown in the chart, at the end of March 2025 the most valuable company was Apple at $3.36 trillion. Yet in the few months since then, Nvidia rose to a value of over $4 trillion, the highest number ever recorded (so far) by a single corporation!
There is also a YouTube video of the chart here.
Your writer started studying big company lists and stocks in about 1963, 62 years ago. At that time, almost no one talked about this valuation number – market capitalization or “market cap.” This is the total value of the stock of a company, how much money you would have to pay to buy the whole thing (though the total cost would also include taking on any debt the company owes). We wonder why this number, so frequently mentioned today, has come into the spotlight?
Our best guess is that the rise of market capitalization-weighted index funds, like ones that hold the S&P 500 stocks in proportion to each company’s market capitalization, has been the biggest driver of this change. Today investors have put trillions of dollars into these funds, which did not exist 60 years ago. This evolution has changed the way we talk, think, and invest. And it had an impact on the prices of the stock of companies that are included in those indexes.
We have to add that we are continually annoyed by investors (and even the best of financial journals) which sometimes refer to the most valuable companies as “the largest.”
While one might say “the largest stock,” that is not the same as the largest company. There is a big difference between size and value.
If one goes back 100 years, company sizes were ranked by the assets of a company (which are the same as the liabilities of a company) because there was no Securities and Exchange Commission with its rules on financial disclosure. Companies were not required to tell shareholders (or anyone else) their annual sales, whereas they did file balance sheets which contained the asset number.
However, assets are not the best way to judge the size of an organization. Companies can pile up useless old inventory or have idle machines and factories, too many assets, but not do much business or employ that many people.
While every industry has its own size measures – number of hotels owned, number of stores, square footage of factories, airline passenger miles flown, cars produced – the one number they all publish is sales (revenues), which are now readily available per SEC requirements (including standards so that figures between companies are as apples-to-apples as possible).
Sales are the ultimate measure of economic activity – how many transactions did you have times the average dollar value of your transactions? A pretty simple concept to understand.
So when Fortune began compiling their list of the 500 biggest American companies in 1955 based on 1954 data, they chose sales as the way to rank them and have continued that policy ever since.
The market capitalization of a company is a most interesting number, but it does not accurately reflect the size, scope, and complexity of an organization. To say that Tesla is “bigger” than General Motors or that Nvidia is “bigger” than Apple is like saying a diamond is bigger than a truckload of coal (they are both just carbon) or a Porsche 911 is bigger than a school bus.
Company valuations, being the result of millions of investors re-evaluating the future of each company daily, can be highly volatile, moving up and down faster and more often that true size, no matter how measured. When a stock drops 20% in a few days, has that company really “shrunk” that fast over that short period? This volatility will be seen in the following paragraphs.
Looking Backward
Let’s start with a picture of the biggest companies at the start of the era, from our previous article. General Motors led the way with sales of $155 billion.
Now look at the valuations of companies back then – the largest was General Electric at $92 billion, about 1.5 times their annual revenue. GE had a value of about 67% of the sales of the largest company, GM. (Note sales numbers are for the year just ended, whereas the valuations are shown for the following March, so the years shown in big red letters differ by one year.)
Jump forward ten years to 2004/5, one third of the way to the present. In the images below, you see the largest company, now Walmart, is almost twice the size that General Motors was ten years earlier, with sales of $288 billion. But the market cap of #1, ExxonMobil, is almost $400 billion, over 133% of the sales of the biggest company, compared with 67% ten years earlier. ExxonMobil’s value was about 1.5 times their sales, in line with that number at GE ten years earlier.
Now let’s move to 2014/15, two-thirds of the way to the present, and after the 2008 recession. In the images below, you see the largest company, still Walmart, is 69% bigger than it was ten years earlier. But the market cap of the top company, Apple at $725 billion, is worth almost exactly 100% more than leader ExxonMobil was ten years earlier. Apple’s value is 4 times their sales, compared with a 1.5 ratio for the most valuable company in those two previous periods.
Now let’s move to today, and after the 2020 pandemic. In the images below, you see the largest company, still Walmart, is 42% bigger than it was ten years earlier. But the market cap of the top company, also still Apple at $3.3 trillion, is worth over 4.5 times what it was worth ten years earlier and is valued at 8.5 times the company’s annual sales! That compares with a 1.5 ratio for the top companies in the earlier eras.
So while Apple’s sales just over doubled in this period, their valuation increased to 4.5 times the old number. In other words, valuations had increased relative to size (which implies they also increased relative to profits in most cases). If you study the big tech companies, you see that Apple was not alone. Even Walmart’s value increased 166% compared with ten years before, while their sales only rose 42%, though their annual size (sales) numbers remain records for any company on earth. And then you have Nvidia and the AI craze. The company was the 35th largest public American company last year, not even making the top 25 size list below, but today rising to the top of the valuation heap at almost $4.2 trillion.
When one puts this all together, the bottom line is that global investors today see the future much more brightly than they did 20 and 30 years ago. They place higher valuations on these companies because they have high confidence that they will continue to grow, and grow rapidly, faster than companies like GM and GE in past eras.
Any American who owns a diversified portfolio of stocks, or who has a 401k or other savings program that invests in the market, has potentially benefitted from this rise. That number is about 62% of all Americans. Another way of looking at this is a straight market chart for the same time period, courtesy of Yahoo Finance:
We should add that, for analytical purposes, we normally only look at market cap to sales ratios when a company is losing money and we have no profit number to compare the valuation to. Here we have used it to show the overall growth of stock market valuations compared to the underlying growth of the economy and the companies, as shown by the sales figures.
Since the value of the stocks of a company are investors’ best estimates (guesses) of the present value (adjusting for inflation) of all the future profits of a company, the ratio of valuation to current profits, the PE or Price-to-Earnings ratio, is far more meaningful and useful than comparing valuations to sizes.
Stay tuned in coming weeks to see updated annual charts based on the highest dollar profit companies and the largest employers.
Gary Hoover
Executive Director
American Business History Center
