What is the most expensive stock in the world? The answer to this question depends on what you mean by stock...and how you define expensive.

When investors speak of stocks, we're usually talking about stocks of publicly traded companies that we can easily buy via a stock broker. For example, you may have heard that Saudi Arabia's state oil company, Saudi Aramco, is preparing to IPO in 2018. Experts believe Saudi Aramco is worth $2 trillion, and if that IPO takes place as scheduled, Saudi Aramco will probably soon become the most expensive stock in the world. But until Aramco IPOs, you cannot invest in it. In contrast, a company like Apple (NASDAQ:AAPL) is worth only $585 billion. But Apple is publicly traded on the Nasdaq today. Thus, Apple is a stock -- and Aramco isn't (yet).

Now that we know what a stock is, how do we value a stock to decide if it is expensive? One way to gauge a stock's value might be to ask how much it costs relative to its earnings, i.e., its price-to-earnings ratio, or P/E ratio. Of course, the problem with using that definition is that you can wind up with a 4,000-way tie. Surveying just the stocks traded on U.S. stock exchanges, financial data provider finviz.com tells us there are nearly 4,000 unprofitable, money-losing stocks you can buy today -- each having a P/E ratio of infinity.

Infinity Infinite Dollar
Image source: Getty images.

Now, a P/E ratio of infinity is probably not what you're looking for when seeking the most expensive stock in the world. Unprofitable stocks may have very expensive P/E ratios -- but they're not particularly valuable to investors.

So how do we arrive at a less ambiguous most expensive result? How do we figure out which profitable stocks are most highly valued by investors? One way might be to focus on stocks with the highest price tags -- but even here, there's some debate. Warren Buffett's Berkshire Hathaway (NYSE:BRK-A), for example, costs $240,000 a share. Indeed, Berkshire has the most expensive price per share of any stock in the world.

It depends on what the meaning of expensive is

But focusing on a stock's price per share ignores the factor of how many shares a company's stock is divided into.

Imagine a hypothetical company called Exorbitant Corp (Ticker: PRCEY) which issues 10 shares, each priced at $1 million each. If your definition of most expensive stock begins and ends with the share price, then you could say Exorbitant Corp is four times as expensive as Berkshire Hathaway. But Exorbitant's market capitalization -- $1 million price per share times 10 shares outstanding -- would be a mere $10 million -- thousands of times less than the $396 billion market capitalization of Berkshire.

For this reason, if you want to know what the most expensive stock in the world is, you need to look at market capitalization. That's the way to learn which companies are truly the most highly valued by investors. Luckily, this is easy to screen for, and the answer is easy to establish.

Drumroll please

According to data from finviz.com, the most expensive stock in the world -- not by share price, but by market capitalization -- is Apple (NASDAQ:AAPL), and the three most expensive stocks in the world, in order, are:

Stock

Market Capitalization

Stock Price

Apple

$585.8 billion

$109.11

Alphabet (NASDAQ:GOOG)

$530.5 billion

$762.52

Microsoft (NASDAQ:MSFT)

$467.8 billion

$60.22

Data sources: finviz.com.

Final note

But what about Warren Buffett's Berkshire Hathaway, you ask? What about the company with the $240,000 share price? As a matter of fact, it's "up there," too, in the rankings of the world's most highly valued stocks. Berkshire's $396 billion market capitalization ranks it right behind Apple, Alphabet, and Microsoft, and makes it the fourth most expensive stock in the world.

Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 340 out of more than 75,000 rated members.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. The Motley Fool owns shares of and recommends Alphabet (C shares) and Apple. The Motley Fool owns shares of Microsoft and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.