Is This Healthcare Stock Undervalued Relative to Its Growth Potential?

Healthcare stocks have been beaten down yet again in 2026. Whether pharmaceutical companies or health insurers, the entire sector's stock prices are generally down. One stock that keeps hitting new lows is Oscar Health (NYSE: OSCR). This is even though the upstart health insurer expects massive growth in 2026, which the market is not fully appreciating.

Here's why now could be a great time to scoop up shares of Oscar Health, which is down over 50% from its October 2025 highs.

Betting on the individual market

Oscar Health is a health insurance provider. That may seem like a commodity business, but the company has a few aces up its sleeve that help it compete, which is why it has been able to aggressively gain market share in the last decade.

First, it is a technology-forward company focused on the customer experience, which is lacking, to put it mildly, among its competitors. Second, it is focused on the Affordable Care Act marketplace (ACA), an individual payor market enacted 15 years ago. This is colloquially known as Obamacare.

Despite gaining more market share last year, Oscar Health's stock is in the gutter for two reasons. ACA subsidies expanded during the COVID-19 pandemic were not renewed by the United States government, creating significant uncertainty about how the market will unfold this year. Second, increased customer utilization drove healthcare costs above expectations last year, putting Oscar Health and other health insurers in the red.

Image source: Getty Images.

Why Oscar Health stock is cheap today

The combination of rising costs and the greatly reduced eligibility for ACA subsidies has Wall Street worried. However, Oscar Health is doing just fine through these headwinds. After the 2026 enrollment period, the company grew to 3.4 million members, up from 2 million at the end of 2025. Some of these members will churn off throughout the year, but it shows how much market share Oscar Health is stealing that it can add this many members even in a period when subsidies are ending for many ACA payors.

With price increases across its plans, Oscar Health believes it can return to profitability, generating $250 million to $450 million in operating income this year. This would still only be a slim profit margin on its expectations for $18.7 billion to $19 billion in revenue, meaning it has even further room to grow earnings beyond 2026.

Right now, Oscar Health stock trades at a market cap of $3.2 billion, or less than 10 times the high end of its 2026 operating earnings guidance. This makes the stock dirt cheap and a great buy for investors focused on the long term.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.