The iShares Micro-Cap ETF (NYSEARCA:IWC) is the crème de la crème for finding the top micro-cap stocks to buy. The ETF tracks the performance of the Russell Microcap Index, a collection of the smallest securities in the small-cap Russell 2000 index. Currently, IWC has 1,655 holdings with market caps ranging from $4 million to $4.9 billion. 

The ETF uses a sampling approach to its stock selection. The top three sectors by weight are health care (26.4%), financials (20%) and industrials (13.4%).  

IWC is flat year to date and over the past year, underperforming small-cap, mid-cap and large-cap stocks. But if this bull market really has legs, we could see capital begin to flow into riskier stocks. Below are three must-buy micro-cap stocks for those in search of high-risk, high-reward plays.

LeMaitre Vascular (LMAT)

LeMaitre Vascular (NASDAQ:LMAT) is not what you would not call an overnight success. Dr. George LeMaitre founded the company in 1983 after the vascular surgeon didn’t like the products available to treat his patients. Forty years later, the maker of niche vascular products sells them directly to hospitals and through distributors in more than 65 countries.

In the first quarter, the company generated record sales of $47.1 million, 22% higher on an organic basis than a year earlier. Due to higher operating expenses, though, operating income fell by 1% year over year to $7.9 million. During the quarter, the company added 16 sales reps to its team, bringing its worldwide total to 128.

In 2023, the company expects annual sales of $190.1 million at the midpoint of its guidance, 15% higher than in 2022. It’s also forecasting a healthy 65.1% gross margin and to generate operating income of $34 million, up 14% year over year. 

In April, the company announced that it was the exclusive U.S. distributor of Aziyo Biologics’ (NASDAQ:AZYO) cardiovascular patches, which reduce inflammation and stimulate the formation of healthy tissue. It has a three-year distribution agreement. In years two and three, it has options to acquire the cardiovascular patch business. 

With shares up 48% in the past year, it might be wise to wait for LMAT to fall back into the $50s where it traded in early May prior to its Q1 earnings announcement before taking a position.

Stellar Bancorp (STEL)

Stellar Bancorp (NYSE:STEL) is the bank holding company of Houston-based Stellar Bank. The bank was created through the September 2022 merger of Allegiance Bancshares and CBTX, two Texas community banks. The merger created the ninth-largest bank in Texas. On May 30, Stellar Bancorp switched its listing to the NYSE from Nasdaq. 

Stellar reported first-quarter results in late April. The quarter was a busy one for the newly merged bank. 

“During the first quarter we completed a number of strategic initiatives, including the conversion of technology systems in February and launching the Stellar Bank brand,” said Chief Executive Officer (CEO) Robert Franklin. 

The bank finished the first quarter with $9.82 billion in interest-earning assets, including $7.89 billion in loans with $8.74 billion in total deposits as of March 31. The bank’s provision for credit losses in the quarter was $3.7 million. On the bottom line, its pre-tax, pre-provision income was $5.73 million, 8.8% higher than on Dec. 31, 2022.

Stellar stock is down 22% year to date, making it an excellent time to buy this micro-cap stock.

Quanex Building Products (NX)

The history of Quanex Building Products (NYSE:NX) dates back to 1927 when the Michigan Seamless Tube Company was incorporated. After several acquisitions and organic expansion, the maker of steel tubing went public in 1965, changing its name to Quanex Corporation in 1977. 

After several more acquisitions, Quanex Corporation was sold, and its building products business was sold to its shareholders as Quanex Building Products Corporation. Several more acquisitions brought the Houston-based company to 2023, where it is now a leading U.S. manufacturer and supplier of components for window and cabinet makers.

The company released fiscal Q2 results in early June. They included declining revenue and adjusted net income. However, it’s important to note that its results in 2022 were a company record, and it’s now returning to a more normal seasonality in its business.

“Based on conversations with our customers and recent demand trends, we are reaffirming prior guidance for fiscal 2023,” said CEO George Wilson. “On a consolidated basis, we continue to estimate that we will generate net sales of $1.12 billion to $1.16 billion, which we expect will yield approximately $130 million to $142 million in Adjusted EBITDA in fiscal 2023.”

Before the financial crisis of 2008, Quanex stock traded near $60. Barring a significant recession, NX shares could revisit those levels in 18 to 24 months. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.