Further Upside For Oscar Health, Inc. (NYSE:OSCR) Shares Could Introduce Price Risks After 37% Bounce

Despite an already strong run, Oscar Health, Inc. (NYSE:OSCR) shares have been powering on, with a gain of 37% in the last thirty days. The annual gain comes to 256% following the latest surge, making investors sit up and take notice.

In spite of the firm bounce in price, considering around half the companies operating in the United States' Insurance industry have price-to-sales ratios (or "P/S") above 1x, you may still consider Oscar Health as an solid investment opportunity with its 0.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Oscar Health

How Has Oscar Health Performed Recently?

With revenue growth that's superior to most other companies of late, Oscar Health has been doing relatively well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Oscar Health will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

Oscar Health's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 55% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 27% over the next year. That's shaping up to be materially higher than the 6.5% growth forecast for the broader industry.

With this information, we find it odd that Oscar Health is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

Oscar Health's stock price has surged recently, but its but its P/S still remains modest. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

A look at Oscar Health's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Oscar Health that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.