This Magnificent Stock Could Deliver Market‑Beating Returns for Years

When looking for multibagger stocks, it is best to hunt in industries with huge addressable markets. Even if a company is the best brand in a sector, but that sector only has $100 million in annual spending and isn't growing, there will be a limit to the company's addressable market unless it can invent new products to serve customers.

One sector where size is not an issue is healthcare, specifically health insurance. Health insurance premiums in the United States are estimated at $1.6 trillion per year, and spending is set to increase faster than GDP due to the country's aging population.

Oscar Health (NYSE: OSCR) is a magnificent healthcare stock taking market share through its technology-focused health insurance offering. Here's why the rapid grower is set to deliver market-beating returns for years to come.

Gaining share in a massive market

The health insurance market changed in 2010 with the enactment of the Affordable Care Act (ACA), which created marketplaces that allow individuals to purchase their own health insurance through a regulated platform each year.

It got off to a bumpy start, but individual payors through the ACA now number around 20 million, making it a meaningful portion of the sector. Oscar has been a big part of this growth with its sole focus on the individual payor market today. Total paying members through Oscar Health plans reached 3.2 million last quarter, an over 50% boost from 2 million in the same quarter a year ago. This is growing much faster than the overall ACA market, indicating that Oscar Health is gaining significant market share.

Why? Because Oscar Health offers a better customer experience with its cloud-first digital platform, saving time and headaches (literally) for its health insurance stakeholders. Now, it is making a big push to transform the employer-led health insurance market to individual contribution plans. These plans allow employers to subsidize employee health insurance, but instead of putting everyone in homogeneous plans, people can use the funds to shop on the ACA marketplace, potentially choosing Oscar insurance.

Management sees a huge addressable market for individual employer-funded plans, potentially reaching 75 million small and mid-sized businesses. With only 3.2 million members last quarter, Oscar Health is guiding for $19 billion in revenue at the high end for 2026. If it can reach 10 million or more customers, that could mean $50 billion or more in annual premiums, depending on where healthcare inflation heads in the years ahead.

Image source: Getty Images.

The path to consistent profitability is technology efficiency

Health insurers are highly regulated under the ACA marketplace, with a maximum loss ratio of 80% each year, leaving 20% of their premium revenue for overhead costs and profitability.

Through its growing scale and technology-driven efficiencies, Oscar Health has consistently reduced overhead costs as a percentage of revenue, which should lead to a nice profit inflection in 2026. It generated $700 million in operating income last quarter, with expectations of $250 million to $450 million in operating earnings for all of 2026 due to seasonality in healthcare utilization costs.

Over the long term, we should see continued progress in lowering its overhead costs as a percentage of revenue through greater nationwide scale. Combined with rapid revenue growth -- premium revenue is up 2,770% since 2021 -- Oscar Health can see a huge profit increase in the years ahead. A 5% profit margin on $50 billion in revenue is $2.5 billion in earnings, which could occur within the next five years.

OSCR Revenue (TTM) data by YCharts

Why Oscar Health can deliver market-beating returns

Oscar Health stock is set up to crush the market in the years ahead if it simply keeps up its path of profit margin expansion and market share gains in health insurance payors.

Right now, the stock trades at a market cap of $6.6 billion. That results in a price-to-earnings multiple of 15, based on the high end of its 2026 earnings guidance, but, more importantly, just 2.5 times my profit assumption for when Oscar Health reaches $50 billion in revenue. That will not happen in 2026, but patient investors should be able to watch a huge profit inflection unfold over the decade ahead, leading to potentially massive stock price appreciation for investors who hold Oscar Health stock and never sell.

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.