Health benefits company Anthem, Inc. (ANTM) in Indianapolis, Ind., operates through four segments: Commercial & Specialty; Government; IngenioRx; and Other. It offers a spectrum of network-based managed care health benefit plans. In comparison, Oscar Health, Inc. (OSCR) in New York City provides health insurance products and services, such as Individual & Family, Small Group, and Medicare Advantage plans.
The COVID-19 pandemic has highlighted the importance of health insurance. Furthermore, as the U.S. population ages, the demand for health insurance is on the rise. According to a report by Research and Markets, the global health insurance market is expected to grow at a 4.7% CAGR to $109.383 billion in 2026. As a result, both ANTM and OSCR should benefit.
OSCR has gained 17.5% in price over the past month, while ANTM has generated negative returns. However, ANTM’s 20.3% gains over the past six months compare with OSCR’s negative returns.
But which of these two stocks is a better buy now? Let’s find out.
ANTM acquired Puerto Rico-based MMM Holdings, LLC on June 30, 2021. Gail K. Boudreaux, ANTM’s President and CEO said, “With our vision to be an innovative, valuable and inclusive healthcare partner we remain committed to enhancing their healthcare experience by providing services that drive greater value and meet their diverse needs.”
On August 13, 2021, OSCR announced its Individual & Family market expansion plans for 2022. The company plans to offer health insurance to individuals and families in three new states and 146 new counties. OSCR’s Co-Founder and CEO, Mario Schlosser, said, “With this latest market expansion, we’re doubling down on our efforts to bring our members the most innovative and personalized care possible.”
Recent Financial Results
ANMT’s revenue increased 15.7% year-over-year to $33.85 billion for its fiscal second quarter, ended June 30, 2021. In addition, the company’s total assets grew 10.9% sequentially to $96.10 billion, while its medical enrollment came in at 44.30 million, up 4.4% year-over-year.
OSCR’s net revenue increased 358.9% year-over-year to $529.28 million for the second quarter ended June 30, 2021. Its total assets grew 63.1% sequentially to $3.71 billion. Also, its membership came in at 563.11 million, up 34.9% year-over-year.
Expected Financial Performance
Analysts expect ANTM’s revenue to increase 13.7% in its fiscal year 2021 and 9.2% in fiscal 2022. The company’s EPS is expected to grow 11.5% for the quarter ending March 31, 2022, and 11.2% in fiscal 2022. Moreover, its EPS is expected to grow at a rate of 13.5% per annum over the next five years.
OSCR’s revenue is expected to increase 58.1% in its fiscal year 2021 and 27.4% in fiscal 2022. Its EPS is expected to grow 53.5% for the quarter ending March 31, 2022, and 32.6% in fiscal 2022. Also, the company’s EPS is expected to grow at a 20% rate per annum over the next five years.
ANTM’s $129.22 billion trailing-12-month revenue is higher than OSCR’s $1.10 million. ANTM is also more profitable, with an EBITDA and net income margins of 6.45% and 3.27%, respectively, compared to OSCR’s negative returns.
Furthermore, ANTM’s 12.20% and 8.13% respective ROE and ROTC compare with OSCR’s negative returns.
In terms of trailing-12-month P/S, OSCR is currently trading at 1.48x, which is 105.5% higher than ANTM’s 0.72x. Furthermore, OSCR’s 1.92x trailing-12-month EV/S is 123.2% higher than ANTM’s 0.86x.
So, ANTM is more affordable.
ANTM has an overall A rating, which equates to a Strong Buy in our proprietary POWR Ratings system. In comparison, OSCR has an overall C rating, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
ANTM has a B grade for Sentiment, which is in sync with favorable analyst sentiment. OSCR, in contrast , has a grade of D for Sentiment, consistent with unfavorable analyst sentiment.
ANTM also has a B grade for Growth, consistent with analysts’ expectations that its EPS will increase significantly in the coming months. In comparison, OSCR has a Growth grade of C, which is consistent with analysts’ expectations that its EPS will remain negative in the coming months.
Moreover, ANTM has a B grade for Value, which is consistent with its 2.54x forward P/B, which is 44.8% lower than the 4.60x industry average However, OSCR has a C grade for Value, which is in sync with its 1.96x forward P/B, which is 71% higher than the 1.15x industry average.
Furthermore, ANTM has a B grade for Stability, while OSCR has a Stability grade of C.
Of the 11 stocks in the B-rated Medical – Health Insurance industry, ANTM is ranked #1, while OSCR is ranked #9.
Because the demand for health insurance is expected to keep growing, both ANTM and OSCR should benefit. However, we think ANTM is a better buy now because of its lower valuation and higher profitability.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Medical – Health Insurance industry here.
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ANTM shares were trading at $377.46 per share on Tuesday afternoon, down $1.27 (-0.34%). Year-to-date, ANTM has gained 18.29%, versus a 21.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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