Oscar Health NYSE:OSCR Stock Report

Oscar Health Grows Revenue But Needs Progress To Profitability

Oscar Health went public in March 2021, raising around $1.44 billion in gross proceeds in an IPO. The firm provides health insurance to U.S. consumers and related technologies to businesses and health plan operators. OSCR has produced revenue growth but needs to make meaningful progress toward profitability. I'm on Hold for OSCR until we see further material progress to operating breakeven. A Quick Take On Oscar Health Oscar Health, Inc. (OSCR) went public in March 2021, raising approximately $1.44 billion in gross proceeds from an IPO that priced at $39.00 per share. The firm provides healthcare insurance services to consumers and related software and healthcare plan solutions. While I’m on Hold for OSCR for now, interested investors should look for a trend toward operating breakeven in future quarterly reports from the company as evidence that management is executing according to its intentions to achieve profitability. Oscar Health Overview New York, New York-based Oscar was founded to develop a modern healthcare insurance delivery system directly for individual consumers and through businesses in the U.S. Management is headed by co-founder and CEO Mario Schlosser, who was previously co-founder of Vostu, a social gaming company in Latin America and senior investment associate at Bridgewater Associates, "where he developed analytical trading models." In addition, the company also provides virtual care offerings, such as its Virtual Primary Care service, which has grown in usage since the onset of the COVID-19 pandemic. OSCR’s Market & Competition According to a 2020 market research report by Grand View Research, the global market for healthcare insurance was an estimated $2.4 trillion in 2019 and is expected to reach $4 trillion by 2027. This represents a forecast CAGR of 6.7% from 2020 to 2027. The main drivers for this expected growth are a continuing rise in the cost of healthcare, growing prevalence of chronic diseases owing to an aging global population and increased discretionary income. Also, below is a chart showing the historical and projected U.S. healthcare insurance market size: U.S. Healthcare Insurance Market (Grand View Research) Major competitive or other industry participants include: UnitedHealth Group (UNH) Aetna (owned by CVS) Anthem/Elevance (ELV) Centene (CNC) Cigna (CI) CVS Health (CVS) Humana (HUM) Kaiser Foundation Oscar Health’s Recent Financial Performance Total revenue by quarter has grown unevenly on a sequential basis: 5 Quarter Total Revenue (Seeking Alpha) Gross profit by quarter has also been variable over the past 5 quarters: 5 Quarter Gross Profit (Seeking Alpha) Selling, G&A expenses as a percentage of total revenue by quarter have varied without a particular trend, as the chart shows here: 5 Quarter Selling, G&A % Of Revenue (Seeking Alpha) Operating income by quarter has remained significantly negative: 5 Quarter Operating Income (Seeking Alpha) Earnings per share (Diluted) have been highly variable but negative in four of the past five quarters: 5 Quarter Earnings Per Share (Seeking Alpha) In the past 12 months, OSCR’s stock price has fallen 75.6 percent vs. the U.S. S&P 500 index’ drop of around 10 percent, as the chart below indicates: 52 Week Stock Price (Seeking Alpha) Valuation Metrics For Oscar Below is a table of relevant capitalization and valuation figures for the company: Measure Amount Enterprise Value -$629,670,000 Market Capitalization $1,060,000,000 Price / Sales [TTM] 0.42 Revenue Growth Rate [TTM] 265.37% Operating Cash Flow [TTM] $63,410,000 CapEx Ratio 2.49 Earnings Per Share (Fully Diluted) -$0.64 (Source - Seeking Alpha) As a reference, a relevant partial public comparable would be Clover Health (CLOV); shown below is a comparison of their primary valuation metrics: Metric Clover Health Oscar Health Variance Price / Sales [TTM] 0.55 0.42 -23.6% Operating Cash Flow [TTM] -$246,500,000 $63,410,000 Revenue Growth Rate 188.0% 265.4% 41.1% (Source - Seeking Alpha) A full comparison of the two companies’ performance metrics may be viewed here. Commentary On Oscar Health In its last earnings call (Source - Seeking Alpha), covering Q1 2022’s results, management highlighted the team’s focus on ‘greater variable cost efficiency using [its] technology to reduce manual processes, as well as leveraging [its] scale to obtain the unit cost.’ Also, the company seeks to optimize its utilization via automated decisioning to providers which reduces the need for manual intervention. The firm is also expanding its virtual primary care to new states and markets to help reduce costs. For its Plus Oscar offering to provider-sponsored and regional health plans, the program has grown to 100,000 client lives served.