Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.

These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. That said, here are two small-cap stocks that could amplify your portfolio’s returns and one that could be down big.

One Small-Cap Stock to Sell:

Neogen (NEOG)

Market Cap: $2.05 billion

Founded in 1981 and operating at the intersection of food safety and animal health, Neogen (NASDAQ: NEOG) develops and manufactures diagnostic tests and related products to detect dangerous substances in food and pharmaceuticals for animal health.

Why Are We Out on NEOG?

1. Annual sales declines of 3.2% for the past two years show its products and services struggled to connect with the market during this cycle
2. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
3. EBITDA losses may force it to accept punitive lending terms or high-cost debt

Neogen’s stock price of $9.38 implies a valuation ratio of 41.8x forward P/E. If you’re considering NEOG for your portfolio, see our FREE research report to learn more.

Two Small-Cap Stocks to Watch:

Axos Financial (AX)

Market Cap: $5.24 billion

Originally founded as Bank of Internet USA in 1999 before rebranding in 2018, Axos Financial (NYSE: AX) is a diversified financial services company that provides digital banking, securities clearing, and investment advisory solutions to retail and business customers nationwide.

Why Do We Love AX?

1. Impressive 17.4% annual net interest income growth over the last five years indicates it’s winning market share this cycle
2. Differentiated product suite results in a Strong performance of its loan book is reflected in its High-yielding loan book and low cost of funds are reflected in its best-in-class net interest margin of 4.9%
3. Share repurchases have amplified shareholder returns as its annual earnings per share growth of 17.7% exceeded its revenue gains over the last five years

At $92.48 per share, Axos Financial trades at 1.7x forward P/B. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

1st Source (SRCE)

Market Cap: $1.80 billion

Tracing its roots back to 1863 during the Civil War era, 1st Source Corporation (NASDAQ: SRCE) is a regional bank holding company that provides commercial, consumer, specialty finance, and wealth management services across Indiana, Michigan, and Florida.

Why Do We Like SRCE?

1. Net interest margin grew by 55.7 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more chips to play with
2. Share buybacks propelled its annual earnings per share growth to 15.2%, which outperformed its revenue gains over the last five years
3. Balance sheet strength has increased this cycle as its 9.1% annual tangible book value per share growth over the last five years was exceptional

1st Source is trading at $73.87 per share, or 1.3x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.

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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.