Health Insurers Face Headwinds As Costs Rise

On July 2nd, the health insurance industry experienced a significant downturn after Centene (NYSE:CNC) withdrew its financial guidance, citing escalating costs. See – Centene: Is The Recent Fall In CNC Stock Justified? This news sent ripples across the market, with Centene’s stock plummeting 40%. Other major players also saw substantial drops: Oscar Health (NYSE: OSCR) was down 19%, UnitedHealth (NYSE: UNH) fell 6%, Molina (MOH) dropped 22%, and CVS (CVS) decreased by 4%.

The core issue facing these insurers is a genuine one: rising medical expenses are eroding their profits. This surge in costs is attributed to several factors, including an increase in the enrollment of less healthy individuals, a higher volume of medical procedures being performed, and persistently high drug prices.

In light of these industry-wide challenges, a critical question for investors is whether Oscar Health’s stock, currently trading around $17, presents a buying opportunity. While OSCR is up 23% year-to-date, it’s still trading 30% below its 52-week high of over $23.

We believe that OSCR stock is a good pick at its current levels of $17. Our conclusion is based on a comprehensive analysis comparing Oscar Health’s current valuation to its recent operating performance and its historical and current financial health. Our in-depth assessment of Oscar Health focuses on key parameters: Growth, Profitability, Financial Stability, and Downturn Resilience. While our analysis indicates the company has moderate operating performance and financial condition, its valuation is currently attractive, which we detail further below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative — having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately, see – UnitedHealth: Buy Or Sell UNH Stock At $325?

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How Does Oscar Health’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, OSCR stock looks slightly cheap compared to the broader market.

• Oscar Health has a price-to-sales (P/S) ratio of 0.5 vs. a figure of 3.1 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 4.3 compared to 20.9 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 41.7 vs. the benchmark’s 26.9

How Have Oscar Health’s Revenues Grown Over Recent Years?

Oscar Health’s Revenues have grown considerably over recent years.

• Oscar Health has seen its top line grow at an average rate of 59.0% over the last 3 years (vs. increase of 5.5% for S&P 500)
• Its revenues have grown 54.2% from $6.5 Bil to $10 Bil in the last 12 months (vs. growth of 5.5% for S&P 500)
• Also, its quarterly revenues grew 42.2% to $3.0 Bil in the most recent quarter from $2.1 Bil a year ago (vs. 4.8% improvement for S&P 500)

How Profitable Is Oscar Health?

Oscar Health’s profit margins are considerably worse than most companies in the Trefis coverage universe.

• OSCR Operating Cash Flow (OCF) over this period was $1.2 Bil, pointing to a poor OCF Margin of 12.1% (vs. 14.9% for S&P 500)
• For the last four-quarter period, OSCR Net Income was $123 Mil – indicating a very poor Net Income Margin of 1.2% (vs. 11.6% for S&P 500)

Does Oscar Health Look Financially Stable?

Oscar Health’s balance sheet looks very strong.

• Oscar Health’s Debt figure was $300 Mil at the end of the most recent quarter, while its market capitalization is $4.2 Bil (as of 7/2/2025). This implies a strong Debt-to-Equity Ratio of 5.8% (vs. 19.4% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $3.0 Bil of the $5.8 Bil in Total Assets for Oscar Health.  This yields a very strong Cash-to-Assets Ratio of 51.1%

How Resilient Is OSCR Stock During A Downturn?

OSCR stock has fared much worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

• OSCR stock fell 94.2% from a high of $36.77 on 10 March 2021 to $2.15 on 21 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is 23.28 on 21 May 2024 and currently trades at around $16.60

Putting All The Pieces Together: What It Means For OSCR Stock

In summary, Oscar Health’s performance across the parameters detailed above are as follows:

• Growth: Extremely Strong
• Profitability: Extremely Weak
• Financial Stability: Extremely Strong
• Downturn Resilience: Extremely Weak
• Overall: Neutral

Overall, Oscar Health has demonstrated a moderate performance across the key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience. While its profit margins appear modest compared to the broader market, this is typical for the health insurance industry, which operates on thin margins and high volume.

This industry-wide characteristic is also reflected in valuation metrics. For instance, Centene and CVS trade at 0.2 times revenue, Molina at 0.4 times, and UnitedHealth (UNH) at 0.7 times.

Despite these industry norms, we believe Oscar Health’s technological platform and strong revenue growth warrant a higher valuation multiple than some of its more traditional insurance counterparts. Overall, we consider it a good pick at current levels.

However, it’s important to acknowledge potential risks. Investors might hesitate to assign a higher multiple due to the inherent slim margins in the industry and the stock’s volatility. Therefore, investors should carefully weigh these risks before deciding to invest in Oscar Health. There always remains a meaningful risk when investing in a single, or just a handful, of stocks. Consider Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

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