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Is Oscar Health Stock a Buy as Growth Surges but Valuation Stays Rich?
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Key Takeaways
OSCR's second-quarter revenues surged 70.4% to $4.9 billion as membership jumped 46.2% to 2.96 million.
OSCR trades at 5.5X tangible book value versus the sub-industry's 1.2X, less room for disappointment.
Oscar Health faces rising churn and medical costs, while favorable reserve items boosted reported earnings.
Oscar Health (OSCR - Free Report) combines rapid membership and revenue growth with improving underwriting economics as it expands its Affordable Care Act (ACA) individual-market footprint. Pricing discipline and technology-led operating leverage have helped turn scale into better profitability.
The investment case is less straightforward at the current valuation. Favorable reserve items, expected disenrollments and ACA affordability pressure raise execution risk, while the stock trades at a sizable premium to its sub-industry and historical norms.
Oscar's Growth Is Outpacing a Contracting ACA Market
Second-quarter 2026 revenues rose 70.4% year over year to $4.9 billion, while membership increased 46.2% to 2.96 million. Broader ACA membership was about 19.2 million in 2026, down about 12% year over year, pointing to meaningful share gains for Oscar.
The growth runway extends beyond core ACA enrollment. Oscar is expanding through individual coverage health reimbursement arrangements (ICHRA), CHOICE and Lucie. CHOICE adoption increased from less than 0.2 million employee lives in 2023 to more than 0.5 million in 2026.
OSCR's Valuation Reflects a Large Quality Premium
Oscar trades at 5.5X trailing tangible book value, above the sub-industry's 1.2X and its five-year median of 3.1X. Its 18.6X forward price-to-earnings multiple also exceeds the sub-industry's 10.0X.
Oscar's projected sales growth of 60.8% is much higher, but its premium leaves less room for disappointment.
Oscar's Earnings Mix Needs Careful Scrutiny
Second-quarter earnings reached $1.10 per share versus a year-earlier loss of 89 cents, while adjusted EBITDA improved to $415.3 million from a $199.4 million loss. Medical expenses rose 48.6%, well below revenue growth, supporting better underwriting economics.
Still, the quarter included $164 million of favorable prior-period development, including about $160 million tied to final 2025 risk adjustment. First-half 2026 prior-period development totaled $232 million, so part of the reported improvement came from items that may not repeat.
The Zacks Consensus Estimate for 2026 and 2027 EPS represents an increase of 208.3% and 21% respectively.
Image Source: Zacks Investment Research
OSCR's Capital Base Offsets Some Execution Risk
Oscar ended second quarter 2026 with $10.2 billion of cash and investments, including $462 million at the parent. Insurance subsidiaries held $1.9 billion of capital, with $994 million above regulatory requirements, giving the company flexibility to fund growth and absorb volatility.
Execution demands remain high. Oscar expected 250,000-300,000 members to be retroactively disenrolled under Centers for Medicare & Medicaid Services program-integrity rules and raised expected second-half churn to 2%-4% per month from 1%-2%. Management also expects the medical loss ratio to rise sequentially through the remainder of 2026.
The balance remains favorable, but valuation argues for selectivity. Oscar currently carries a Zacks Rank #1 (Strong Buy), along with a Growth Score of A, Value Score of B, Momentum Score of C and VGM Score of A.
The top Zacks Rank reflects favorable earnings-estimate revision trends over the shorter term. The Growth Score of A and VGM Score of A support investors focused on growth and blended style characteristics, while the Value Score of B is also favorable across multiple criteria. The Momentum Score of C and premium valuation keep the setup from being uniformly positive.
The Zacks Consensus Estimate for 2026 earnings of Elevance Health has moved north in the last 30 days, while that for UnitedHealth witnessed no movement in the same time frame.
In terms of share price movement, Elevance Health and UnitedHealth Group have lost 1.1% and 11%, respectively, in the past three months.
View the Zacks #1 Rank List
Image: Bigstock
Is Oscar Health Stock a Buy as Growth Surges but Valuation Stays Rich?
Key Takeaways
Oscar Health (OSCR - Free Report) combines rapid membership and revenue growth with improving underwriting economics as it expands its Affordable Care Act (ACA) individual-market footprint. Pricing discipline and technology-led operating leverage have helped turn scale into better profitability.
The investment case is less straightforward at the current valuation. Favorable reserve items, expected disenrollments and ACA affordability pressure raise execution risk, while the stock trades at a sizable premium to its sub-industry and historical norms.
Oscar's Growth Is Outpacing a Contracting ACA Market
Second-quarter 2026 revenues rose 70.4% year over year to $4.9 billion, while membership increased 46.2% to 2.96 million. Broader ACA membership was about 19.2 million in 2026, down about 12% year over year, pointing to meaningful share gains for Oscar.
The growth runway extends beyond core ACA enrollment. Oscar is expanding through individual coverage health reimbursement arrangements (ICHRA), CHOICE and Lucie. CHOICE adoption increased from less than 0.2 million employee lives in 2023 to more than 0.5 million in 2026.
OSCR's Valuation Reflects a Large Quality Premium
Oscar trades at 5.5X trailing tangible book value, above the sub-industry's 1.2X and its five-year median of 3.1X. Its 18.6X forward price-to-earnings multiple also exceeds the sub-industry's 10.0X.
Oscar's projected sales growth of 60.8% is much higher, but its premium leaves less room for disappointment.
Oscar's Earnings Mix Needs Careful Scrutiny
Second-quarter earnings reached $1.10 per share versus a year-earlier loss of 89 cents, while adjusted EBITDA improved to $415.3 million from a $199.4 million loss. Medical expenses rose 48.6%, well below revenue growth, supporting better underwriting economics.
Still, the quarter included $164 million of favorable prior-period development, including about $160 million tied to final 2025 risk adjustment. First-half 2026 prior-period development totaled $232 million, so part of the reported improvement came from items that may not repeat.
The Zacks Consensus Estimate for 2026 and 2027 EPS represents an increase of 208.3% and 21% respectively.
Image Source: Zacks Investment Research
OSCR's Capital Base Offsets Some Execution Risk
Oscar ended second quarter 2026 with $10.2 billion of cash and investments, including $462 million at the parent. Insurance subsidiaries held $1.9 billion of capital, with $994 million above regulatory requirements, giving the company flexibility to fund growth and absorb volatility.
Execution demands remain high. Oscar expected 250,000-300,000 members to be retroactively disenrolled under Centers for Medicare & Medicaid Services program-integrity rules and raised expected second-half churn to 2%-4% per month from 1%-2%. Management also expects the medical loss ratio to rise sequentially through the remainder of 2026.
Oscar's Ratings Tilt Positive Despite Premium Pricing
The balance remains favorable, but valuation argues for selectivity. Oscar currently carries a Zacks Rank #1 (Strong Buy), along with a Growth Score of A, Value Score of B, Momentum Score of C and VGM Score of A.
The top Zacks Rank reflects favorable earnings-estimate revision trends over the shorter term. The Growth Score of A and VGM Score of A support investors focused on growth and blended style characteristics, while the Value Score of B is also favorable across multiple criteria. The Momentum Score of C and premium valuation keep the setup from being uniformly positive.
Other Stocks to Consider
Elevance Health, Inc. (ELV - Free Report) and UnitedHealth Group (UNH - Free Report) are two other top-ranked stocks. Both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for 2026 earnings of Elevance Health has moved north in the last 30 days, while that for UnitedHealth witnessed no movement in the same time frame.
In terms of share price movement, Elevance Health and UnitedHealth Group have lost 1.1% and 11%, respectively, in the past three months.