Oscar Health, Inc. (NYSE:OSCR) Might Not Be As Mispriced As It Looks After Plunging 27%

The Oscar Health, Inc. (NYSE:OSCR) share price has fared very poorly over the last month, falling by a substantial 27%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 16% in that time.

Even after such a large drop in price, when close to half the companies operating in the United States' Insurance industry have price-to-sales ratios (or "P/S") above 1.1x, you may still consider Oscar Health as an enticing stock to check out with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Oscar Health

How Oscar Health Has Been Performing

Recent times have been advantageous for Oscar Health as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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.

How Is Oscar Health's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Oscar Health's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 57% last year. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 14% per year as estimated by the seven analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 7.3% per annum, which is noticeably less attractive.

In light of this, it's peculiar that Oscar Health's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What Does Oscar Health's P/S Mean For Investors?

Oscar Health's P/S has taken a dip along with its share price. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

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.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Oscar Health with six simple checks on some of these key factors.

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.