Fortune 500 vs. S&P 500: Key Differences in Finance and Industry

The Fortune 500 and S&P 500 are two widely referenced lists in business and finance, but they serve different purposes. One ranks companies by revenue, while the other tracks stock market performance. Understanding their differences is essential for investors, analysts, and those interested in corporate rankings.

While both highlight major corporations, their selection criteria and focus vary significantly, affecting their use in financial analysis and industry discussions.

Scope and Composition

The Fortune 500 ranks the largest U.S. companies by total revenue, including both publicly traded and privately held firms. This allows corporations like Cargill and Koch Industries, which are not listed on stock exchanges, to appear on the list. The S&P 500, by contrast, consists exclusively of publicly traded companies, selected based on market capitalization and liquidity.

Because the Fortune 500 includes private firms, it provides a broader view of corporate scale beyond stock market performance. The S&P 500, as a stock market index, reflects investor sentiment and market trends rather than just business size. Companies in the S&P 500 must meet financial and liquidity requirements, ensuring they are actively traded and representative of the overall market.

Inclusion Criteria

The Fortune 500 is based solely on annual revenue, meaning any company that meets the revenue threshold qualifies, regardless of profitability, stock performance, or financial stability. This results in the inclusion of businesses across various financial conditions, from highly profitable enterprises to those operating at a loss but still generating substantial sales.

The S&P 500 applies stricter financial and market-based criteria. To be considered, a company must have a market capitalization of at least $14.5 billion as of 2024 and demonstrate consistent profitability, with the most recent quarter and the sum of the previous four quarters showing positive earnings. This requirement filters out companies that may have high revenue but struggle with financial stability.

Liquidity is also a key factor. Companies must have a minimum trading volume and a significant proportion of shares available to the public, ensuring they are actively traded and accessible to investors. This prevents companies with limited public float or low trading activity from distorting the index’s representation of the broader market.

Revenue vs. Market Value Focus

The Fortune 500 ranks companies by total revenue, meaning a company’s position is determined by its ability to generate sales, regardless of profitability or stock performance. A company with high expenses or thin profit margins can still rank highly if it generates substantial revenue.

The S&P 500, on the other hand, is built around market capitalization, which represents the total value of a company’s outstanding shares. Market cap fluctuates based on investor sentiment, earnings expectations, and broader economic conditions, making it a forward-looking measure tied to stock performance. A company with modest sales but strong profit margins and high investor confidence can have a larger market cap than a revenue giant with weaker financial fundamentals. This means the S&P 500 often favors companies with strong earnings growth and positive market outlooks, even if they do not rank among the highest-grossing businesses.

Industry Coverage

The Fortune 500 captures a broader spectrum of industries, including those with minimal stock market presence. Sectors such as wholesale distribution, construction, and privately held energy conglomerates feature prominently, reflecting industries where high revenue does not necessarily translate to public investment appeal. Industries with low profit margins but significant economic impact, such as supermarkets and logistics, receive greater visibility. Retail giants like Walmart consistently dominate the Fortune 500 due to their massive sales volume, despite operating in a sector known for thin margins.

The S&P 500, by contrast, skews toward industries that attract investor capital and exhibit strong equity market performance. Technology, healthcare, and financial services have an outsized presence, with firms like Apple, Microsoft, and JPMorgan Chase carrying substantial weight within the index. The methodology used to select S&P 500 constituents results in an underrepresentation of capital-intensive businesses with unpredictable earnings, such as airlines and commodity-driven industries. These sectors may have large revenue figures but often face volatile profits, making them less likely to meet the index’s selection criteria.

Analytical Uses

The Fortune 500 is used to assess overall economic activity, as it highlights the largest revenue-generating companies across various sectors. Policymakers, economists, and business strategists examine trends within this list to gauge shifts in industry dominance and corporate expansion. The increasing presence of healthcare and technology firms in recent years reflects broader economic shifts toward digital services and medical advancements. Since the list includes private companies, it provides a more comprehensive view of corporate scale beyond what is visible in public markets.

The S&P 500 is primarily used as a benchmark for stock market performance and investment strategies. Fund managers and institutional investors track its movements to assess market trends, as the index represents a diversified cross-section of publicly traded firms. Many mutual funds and exchange-traded funds (ETFs) replicate its performance, making it a key reference point for portfolio management. Analysts also use the index to evaluate macroeconomic conditions, as fluctuations in its value often signal investor sentiment regarding interest rates, inflation, and corporate earnings. Because it is weighted by market capitalization, larger companies exert greater influence on its movements, meaning shifts in major firms like Apple or Amazon can significantly impact the index’s overall trajectory.