It's that time of year again: earnings season. Many companies have reported quarterly operating results and announced important business updates. More are set to provide strategic updates in the coming weeks.

That includes fertilizer producer Intrepid Potash (IPI -0.76%) and up-and-coming pharma Axsome Therapeutics (AXSM -1.05%). Both of these small-cap stocks has had a very different path through the market in the last three years, but each business expects 2019 to be an important year. Here's what investors and analysts will be watching.

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Intrepid Potash: Will margins continue to improve?

Intrepid Potash had a great year in 2018 thanks to sharply improved gross margin. While revenue grew 17% year over year, gross profit leaped 322% thanks to improved fertilizer selling prices, increased operating efficiency, and a big boost from the company's newest segment: oil-field solutions. That bump in gross profit flipped the business from an operating loss of $14 million in 2017 to an operating profit of $15.5 million in 2018. 

Will that trend continue this year? Investors might be pretty confident for another strong year of operating margins in 2019. The company delivered increased profitability in each of its three business segments. The potash and Trio (a specialty fertilizer called langbeinite) segments, beholden to the whims of fertilizer markets, have benefited from a laser focus on operating efficiency in the last two years, but profit increases this year might be completely dependent on selling prices.

Meanwhile, the oil-field solutions segment is likely to continue driving operating income higher. Intrepid Potash sells some of its excess water rights in the Permian Basin to oil and gas drillers, which use it for production of crude energy products. It's unbelievably profitable: The segment had a gross margin of 75% in 2018. That should continue in 2019, especially after the recent purchase of the Dinwiddie Assets. Investors will be eager to hear from management about plans to increase the value of the property when the business reports Q1 2019 earnings. Initial reports suggest the company will increase water output threefold in the next two years.

Investors should also keep an eye on one-time inventory decisions, seasonality factors and trends, and any impact from extreme weather at the start of the year, which could have impacted freight costs and temporarily eroded gross margin for the two fertilizer segments. 

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What does Breakthrough Therapy designation mean for AXS-05?

Axsome Therapeutics rose from obscurity and a sub-$100-million market cap at the beginning of 2019 to a breakout depression-drug developer worth $650 million today. The stock's incredible upward trajectory has been fueled by successful phase 2 clinical results for its lead drug candidate, AXS-05, in major depressive disorder, which immediately drew comparisons to Sage Therapeutics and SAGE-217.

Both drug compounds offer a unique mechanism of action for treating depressive disorders that have seen relatively little therapeutic innovation in recent years. That has investors eyeing multibillion-dollar market opportunities for each. The peer is well on its way: SAGE-217 earned market approval for postpartum depression earlier this year. That's helped Sage Therapeutics ascend to a market cap of $8.6 billion.

While investors shouldn't get too carried away with Axsome Therapeutics just yet, the potential for the lead drug candidate is exciting. The Food and Drug Administration awarded AXS-05 the coveted Breakthrough Therapy designation for major depressive disorder in late March, which could help to expedite development and regulatory review. It will surely be the highlight of the discussion on the upcoming Q1 2019 earnings conference call, although the company has a total of seven clinical programs in its pipeline, proving it's anything but a one-trick pony. 

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Keep a long-term outlook

Small-cap stocks are generally more volatile than larger peers, but they can also provide greater wealth-building potential over the long run. That's why it's important to identify strong businesses with important advantages and remain patient through the ups and downs, adjusting as the facts on the ground dictate.

Although Intrepid Potash is a relatively small player in fertilizer markets, it's done an excellent job leveraging water assets in the Permian Basin to create a new stream of profits for the business. Meanwhile, Axsome Therapeutics has yet to commercialize a single drug candidate, but it's on a promising trajectory. Well-designed clinical trials provide a dose of confidence for investors, who are otherwise right to remain cautious with the development-stage pharma company. Investors watching both companies will learn a lot about the year ahead when they report first-quarter 2019 earnings this month.