Oscar Health Inc. (NYSE: OSCR)
has emerged as a notable player in the health insurance sector, leveraging
technology to enhance healthcare accessibility and affordability. Despite
facing challenges since its IPO, the company's recent financial performance
indicates a promising turnaround. This article delves into Oscar Health's
background, financial performance, stock valuation, growth prospects, and
associated risks, providing a comprehensive overview for potential investors.
About Oscar Health
Founded in November 2012 by Mario
Schlosser, Kevin Nazemi, and Joshua Kushner, Oscar Health Inc. is headquartered
in New York City. The company aims to revolutionize the health insurance
industry by integrating technology into its services. Oscar offers health plans
in the Individual, Small Group, and Medicare Advantage markets, operating
across 18 states with over 2 million members. Its services include
telemedicine, transparent claims pricing, and incentives for maintaining
health, such as cash rewards for meeting fitness goals .
Oscar Health Financial
Performance
Oscar Health delivered a strong
financial performance in Q1 2025, signaling substantial operational improvement
and momentum in its business growth. The company reported quarterly revenue of
$3.04 billion, a 42.2% increase compared to $2.14 billion in Q1 2024. Earnings
per share (EPS) rose to $0.92, up 47.21% from $0.62 in the same quarter last
year, reflecting greater efficiency and profitability. On a trailing twelve
months (TTM) basis, Oscar's revenue climbed to $10.08 billion, a robust 54.26%
year-over-year increase from $6.53 billion. EPS over the TTM also improved
significantly, reaching $0.46, a substantial turnaround from the negative $0.24
recorded a year earlier, an impressive growth of 229.09%.
Free cash flow per share (TTM)
surged to $4.43 from -$0.34 in the prior year, an extraordinary improvement of
1,402.94%. Profitability margins further reinforce the positive trend, with a
gross profit margin of 20.28%, a net profit margin of 1.22%, and a free cash
flow margin of 11.82%. These figures suggest that Oscar Health is not only
growing rapidly but also managing its resources efficiently.
The company’s return on assets
(ROA) stands at 2.06%, and return on equity (ROE) is 10.47%, indicating
effective asset utilization and strong returns to shareholders. Additionally, a
conservative debt-to-equity ratio of 0.27 highlights a healthy balance sheet
with limited reliance on debt financing.
Over the past five years, Oscar
Health has increased its revenue at a 114.8% CAGR, while net income started to
turn positive in 2024 and is continuing to grow. Free cash flow is also growing
but has fluctuated inconsistently.
Oscar Health 2025 Financial
Forecast
Looking ahead, analysts project
Oscar to continue the growth, forecasting revenue to reach $11.24 billion in
2025, a 22.5% increase from 2024’s $9.17 billion. EPS is expected to grow significantly
to $0.77 in 2025, up from $0.10 in 2024, representing a staggering 665.71%
projected growth. However, despite these strong fundamentals, analysts
currently assign a "Sell" rating on the stock with a price target of
$13.83, suggesting a potential downside of 16% from current levels. I think
analyst are very conservative and cautious about Oscar because of the potential
expiration of enhanced exchange subsidies, which are set to lapse on January 1,
2026. These subsidies are crucial to Oscar Health's earnings, and their
discontinuation could significantly impact the company's financial performance.
But in my personal opinion, I think Oscar Health will manage it.
OSCR Stock Performance and
Valuation
At the time this article is
written, Oscar Health's stock is trading at $16.47 per share, reflecting a
25.1% decline over the past year. This performance significantly lags behind
the S&P 500, which gained 11.8% in the same period. Since its initial
public offering (IPO) in March 2021, the stock has fallen by 46.8%, while the
S&P 500 has climbed 54.5%, highlighting a substantial underperformance
relative to the broader market.
However, because of this
historical weakness, Oscar Health's current valuation metrics become
undervalued, particularly in light of its accelerating growth and improving
financials. The company’s price-to-sales (TTM) ratio stands at just 0.41, with
a forward price-to-sales ratio of 0.38, indicating the market is pricing the
company at a low multiple of its revenue. Its price-to-earnings (TTM) ratio is
36.27, and the forward P/E ratio is expected to improve to 25.64 as earnings
increase. Notably, the price-to-free cash flow (TTM) ratio is just 3.52, which is
very low and making the stock very attractive because of its low valuation
compared to the generated free cash flow.
Based on finchat data if we look
at the forward PS ratio from 2022 until now it is currently trading at above
the average but it’s still at a low value below 1 and projected to grow this
year while EPS also projected to grow. These
figures, when considered alongside Oscar Health’s rapid revenue growth,
positive earnings trajectory, and expanding free cash flow, suggest that the
stock may present an attractive opportunity for investors seeking undervalued
growth plays in the healthcare sector.
Oscar Health Growth Potential
Oscar Health business growth are
driven by several factors.
- Membership Growth and Market
Expansion
Oscar Health demonstrated robust membership growth in Q1 2025, with effectuated members reaching 2 million, a 41% year-over-year increase driven by strong retention rates, new customer acquisition, and high-performing condition-specific health plans addressing specialized market demands. The Individual and Small Group segment remained the primary growth engine, expanding 46% to 2.02 million members compared to Q1 2024.
This expansion reflects Oscar's technological capabilities in data analytics and AI-driven care coordination, combined with personalized member experiences that differentiate its offerings in competitive insurance markets. The company's strategic focus on tailored health solutions and virtual care accessibility continues to drive market penetration while maintaining competitive pricing structures across its expanding service areas. - Strategic Growth Initiatives
Oscar Health's growth strategy encompasses several key initiatives that position the company for continued expansion. The company's strategic focus on technology and innovation has been instrumental in driving its rapid growth in the individual insurance market. By leveraging artificial intelligence and data science to analyze individual user health data, Oscar can provide more personalized and effective healthcare services.
The company's virtual care capabilities represent another significant growth driver. Oscar Health was an early adopter of telemedicine services, which have seen accelerated demand following the pandemic. The company's 24/7 virtual care platform enables members to easily consult with doctors online, enhancing convenience and satisfaction while potentially reducing costs. - Partnerships and Market
Opportunities
Oscar Health's strategic partnerships have played a crucial role in its growth trajectory. Collaborations with health insurance giants like Cigna and Cleveland Clinic have enabled the company to build broader healthcare networks and offer competitive plans to small businesses and individuals. These partnerships allow Oscar to expand its customer base, strengthen its medical network, increase competitiveness, and improve cost efficiency.
The company also sees growth opportunities arising from market dynamics. During its earnings call, Oscar's management indicated that a competitor's exit from the market presents a significant opportunity, with considerable overlap in their service areas. The company plans to maintain competitive pricing while remaining disciplined in underwriting and risk adjustment practices.
Risks to Consider
While Oscar Health looks
undervalued, investor should be mindful for potential risks.
- Regulatory and Political Risks
A major risk stems from Oscar Health's reliance on the Affordable Care Act (ACA) subsidies, which have been a substantial part of its business growth in recent years and Enhanced subsidies for Affordable Care Act (ACA) are set to expire at the end of 2025. The ACA has faced political opposition, notably from former President Trump, who attempted to repeal these subsidies in 2017. Although those efforts failed, future changes or repeal of the ACA or its subsidies could severely disrupt Oscar Health's business model. If subsidies were removed or replaced, Oscar would need to pivot heavily towards the Individual Coverage Health Reimbursement Arrangement (ICHRA) market, which could be challenging for a smaller company and potentially disastrous for its growth prospects. - Industry Competition
Oscar faces competition from major national insurers such as UnitedHealth Group, Anthem, Cigna, Aetna (a CVS Health subsidiary), Humana, and Molina Healthcare. These players have extensive provider networks, deep financial resources, and diversified product portfolios that cover individual, group, and government-sponsored plans. For example, UnitedHealth Group is the largest insurer in the U.S. with broad service offerings and a vast provider network, making it a formidable competitor for Oscar. - Reliance on Reinsurance
Agreements
Oscar Health uses quota share reinsurance to meet capital and surplus requirements and mitigate downside risk on medical claims. If regulators do not approve these agreements or if the company cannot negotiate favorable renewals, its capital position could be negatively impacted, potentially leading to non-compliance with regulatory requirements and financial strain.
Conclusion
Oscar Health's impressive Q1 2025 results, coupled with its innovative approach to health insurance, suggest a company on the rise. While the stock has underperformed since its IPO, current valuation metrics and growth prospects indicate potential for investors. As with any investment, it's essential to consider the associated risks, but Oscar Health's trajectory makes it a compelling option for those seeking exposure to the evolving healthcare sector.
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