Oscar Health Stock Fundamentals And Valuation Insights

Oscar Health stock (NYSE: OSCR) has recently surged to over $16 following news of a potential two-year extension to Obamacare subsidies, which could positively impact demand for health insurance through the Affordable Care Act (ACA) Marketplace. The rally highlights investor optimism around near-term policy support, but the core question remains: Is OSCR stock still a compelling buy after its recent run-up? We think so. Before we dive into the details, if you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 105% since its inception. 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. Separately, see – Which Is A Better Pick: Johnson & Johnson or Pfizer Stock?

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Growth and Market Position

Oscar Health has demonstrated strong growth, with revenues expanding at an average annual rate of 46.4% over the past three years—far outpacing the S&P 500’s growth of 5.5%. Over the last 12 months, revenues grew 37.4% to $11 billion, and the most recent quarter saw a 23.2% year-over-year increase. This robust growth trajectory positions OSCR as a standout in its sector, especially compared to broader market averages. Look at Oscar Health’s Revenue Comparison for more details.

Profitability and Margins

Despite its impressive revenue growth, Oscar Health’s profitability remains weak. The company’s operating cash flow margin is 6.8%, significantly below the S&P 500’s 20.5%. Net income for the last four quarters was -$244 million, resulting in a negative net income margin of -2.2% (compared to 13.1% for the index). These metrics highlight ongoing challenges in converting top-line growth into sustainable earnings.

Financial Stability

Oscar Health boasts a strong balance sheet. The company’s debt-to-equity ratio stands at 15.9%, well below the S&P 500’s 21.0%, and cash makes up 52.8% of its total assets—significantly higher than the index’s 7.0%. This robust financial position offers resilience against downturns and provides flexibility for future strategic moves.

OSCR Stock Valuation

OSCR’s valuation metrics show it is relatively cheap compared to the broader market, with a current price-to-sales (P/S) ratio of 0.4 versus 3.2 for the S&P 500.

However, it is important to note that the health insurance sector typically trades at lower multiples due to inherent thin profit margins and regulatory challenges. Oscar Health’s P/S ratio of 0.4 aligns with this sector trend, reflecting market expectations consistent with industry norms.

Moreover, OSCR’s current valuation is not unusually low by its own standards. Over the past four years, the company’s average P/S ratio has been around 0.4. This indicates that while OSCR is cheaper than the broader market, it is fairly valued relative to its historical range, which is typical for companies facing profitability and margin pressure as seen in the health insurance sector.

Volatility and Downturn Resilience

OSCR stock has not fared well during market downturns. During the 2022 inflation shock, OSCR plunged 94.2% from its peak, while the S&P 500 fell 25.4%. The stock has not yet recovered to its previous highs and remains well below its 2021 peak. This weak resilience should be a caution for risk-averse investors.

Overall Assessment

Oscar Health’s growth and financial stability are strong, but its profitability and downturn resilience are major concerns. The current valuation is attractive, especially relative to the S&P 500, supporting the view that OSCR could be a good pick for investors comfortable with higher volatility and sector-specific regulatory risks. However, those seeking lower volatility may prefer diversified portfolios like the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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