Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.

Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here are two small-cap stocks that could amplify your portfolio’s returns and one that may have trouble.

One Small-Cap Stock to Sell:

First Merchants (FRME)

Market Cap: $2.14 billion

Dating back to 1893 when it first opened its doors in Indiana, First Merchants (NASDAQ: FRME) is a Midwest regional bank providing commercial, consumer, and wealth management services through branches in Indiana, Ohio, Michigan, and Illinois.

Why Do We Think Twice About FRME?

1. Flat sales over the last two years suggest it must find different ways to grow during this cycle
2. Net interest income trends were unexciting over the last five years as its 7.1% annual growth was below the typical banking firm
3. Net interest margin dropped by 27.3 basis points (100 basis points = 1 percentage point) over the last two years, implying the firm’s loan book profitability fell as competitors entered the market

At $37 per share, First Merchants trades at 0.9x forward P/B. To fully understand why you should be careful with FRME, check out our full research report (it’s free for active Edge members).

Two Small-Cap Stocks to Buy:

Aris Water (ARIS)

Market Cap: $775.6 million

Primarily serving the oil and gas industry, Aris Water (NYSE: ARIS) is a provider of water handling and recycling solutions.

Why Will ARIS Outperform?

1. Impressive 23.8% annual revenue growth over the last five years indicates it’s winning market share this cycle
2. Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 30.4% outpaced its revenue gains
3. Free cash flow margin increased by 38.4 percentage points over the last five years, giving the company more capital to invest or return to shareholders

Aris Water’s stock price of $23.60 implies a valuation ratio of 14.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.

Old National Bank (ONB)

Market Cap: $8.35 billion

Tracing its roots back to 1834 when Andrew Jackson was president, Old National Bancorp (NASDAQ: ONB) is a bank holding company that provides commercial and consumer loans, deposit services, wealth management, and treasury solutions primarily throughout the Midwest region.

Why Do We Love ONB?

1. Annual net interest income growth of 25.5% over the past five years was outstanding, reflecting market share gains this cycle
2. Demand for the next 12 months is expected to accelerate above its five-year trend as Wall Street forecasts robust net interest income growth of 39.3%
3. Earnings growth has trumped its peers over the last five years as its EPS has compounded at 10.3% annually

Old National Bank is trading at $21.31 per share, or 1x forward P/B. Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.

Stocks We Like Even More

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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