Small-cap stocks can have exciting potential. At low valuations, there may be much more upside for investors than there can be for large tech stocks with market caps in excess of $1 trillion. One red-hot stock of late has been Mind Medicine (NASDAQ: MNMD). Shares of the psychedelic biotech company have jumped by close to 140% already this year. Here's why there may be room for the stock to rise even higher.

Investors have been bullish on Mind Medicine recently because the company has released positive results relating to MM120 (its LSD-based treatment), which has shown effectiveness in reducing anxiety in patients. What's particularly promising is that only a single dose was used without any additional therapeutic intervention.

A comparable drug from Johnson & Johnson, Spravato, normally requires multiple treatments for the first four weeks, which gradually comes down afterward. MM120 has the potential to be a much more efficient treatment, which can result in better outcomes and fewer side effects for patients.

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Source Fool.com