Oscar Health Stock Analysis: Buy or Sell?

SUMMARY

Parkev Tatevosian, CFA, analyzes Oscar Health's recent financial performance, highlighting significant membership growth and operational improvements driven by artificial intelligence. He maintains a buy rating on the stock, though with low conviction due to the company's limited operating history and ongoing volatility.

MAIN POINTS

• Oscar Health leverages artificial intelligence to automate claims and has achieved a 46% year-over-year increase in membership to 2.96 million. [0:00]
• The company's operating profit margin improved from -90% in 2021 to 4.11% recently, and its return on invested capital reached 30%. [1:00]
• Oscar Health's forward price-to-earnings ratio is 16.1, near its historical high, and a revised discounted cash flow model estimates fair value at $49.90 versus a market price of $30.80. [2:00]
• Despite trading near its 52-week high, the stock is considered undervalued due to strong fundamental improvements in membership, margins, and capital returns. [3:01]
• The analyst reiterates a buy rating for Oscar Health as of August 13, 2026, but expresses low conviction given the company's short operating history and potential volatility. [4:00]
• Oscar Health's use of AI in healthcare continues to attract retail investor interest, with early signs of performance improvement and ongoing industry impact. [5:00]

DETAILED ANALYSIS

Oscar Health has demonstrated notable operational and financial progress, largely attributed to its integration of artificial intelligence in claims automation. This technological advancement has contributed to a substantial increase in efficiency, reflected in the company's operating profit margin, which has improved from a deeply negative -90% in 2021 to a positive 4.11% over the trailing twelve months. Membership growth has also been robust, with the company reaching 2.96 million members, a 46% increase year-over-year.

Such growth has propelled revenue from approximately $1 billion in 2021 to over $15 billion in the most recent period, underscoring the company's rapid expansion.

The return on invested capital stands at an impressive 30%, suggesting that management is effectively deploying capital to generate returns well above the company's estimated opportunity cost of capital, which is 15% or lower. This level of capital efficiency is a positive indicator for potential long-term shareholder value creation. In terms of valuation, Oscar Health is trading at a forward price-to-earnings ratio of 16.1, which is at the higher end of its historical range.

However, a discounted cash flow analysis, updated to reflect stronger-than-expected top-line growth and operational improvements, places the fair value of the stock at $49.90, significantly above its current market price of $30.80. This suggests that, despite the stock trading near its 52-week high of $33, it remains undervalued when considering the underlying business fundamentals.

The analyst maintains a buy rating for Oscar Health, reaffirmed on August 13, 2026, but notes a low conviction level due to the company's relatively short operating history—data is only available since 2021—and the potential for continued volatility in its financial performance. While the improvements are promising, the limited track record warrants caution. Nonetheless, Oscar Health's ongoing adoption of artificial intelligence in healthcare operations continues to draw significant interest from retail investors, with early evidence indicating that these innovations are already enhancing performance.

The company remains in the early stages of its growth trajectory, and future developments in AI utilization could further impact its operational and financial outcomes.

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