Clover Health Investments (NASDAQ:CLOV) has finally started to bounce. CLOV stock has climbed about 50% above its lows in recent weeks. Since the stock was over $10 last year, a rally from $2 to just over $3 is hardly a huge comeback. Still, it’s better than continuing to make new lows.

So is the rally by Clover’s shares a sign that the worst is finally over for them? Unfortunately, that’s not the case. In fact, there was virtually nothing positive about the company’s most recent quarterly earnings report .

As I’ve emphasized in my previous columns on CLOV stock,  Clover will eventually need to be sold to another insurance firm. I’ve reached that conclusion because Clover’s management hasn’t been able to get the company’s basic costs under control, leading to spiraling losses.

Beware of Unprofitable Revenue

Over the last nine months or so, CLOV stock has tended to rally immediately after Clover reports its quarterly results. Clover has a habit of beating analysts’ average revenue projections, often by significant amounts. In August 2021, for example, CLOV stock jumped from $8 to $10 after the company reported much higher-than-expected Q2 revenue, fueling traders’ hopes for a short squeeze.

Instead, within a week, CLOV stock had fallen to $7.50 as it resumed its downward trend. That’s because analysts realized that Clover had a low-quality business which was buying growth. Insurance companies can easily increase their revenues by selling policies  whose benefits are more valuable than the premiums paid by their customers.

Clover appears to frequently use the latter approach. So the insurer posts strong revenue growth, but its medical cost ratio is over 100%. As a result, it loses money on its health insurance policies. Other health insurers actually earn money on their policies.

Humana Is the Opposite of Clover

Humana (NYSE:HUM), a giant in Clover’s key Medicare Advantage market, has a very profitable health insurance business. In 2022 , Humana plans to sharply limit the number of consumers enrolled in its Medicare Advantage plans. The company is using that approach because it “continues to maintain pricing discipline in a highly competitive market,” according to its SEC filing. That’s a polite way of saying that Humana is not willing to generate losses by matching Clover’s reckless prices.

Over the past ten years, Humana’s stock has soared from $90 to $425. That’s understandable, as the company’s earnings and cash flow have jumped tremendously. By contrast, Clover, with its unprofitable approach, has caused its share price to collapse.

Putting Hard Numbers on Clover’s Struggles

Revenue growth is largely meaningless for health insurance companies. Humana — which has generated tons of shareholder value  — is intentionally avoiding revenue growth so that it can earn more profits. Clover has aggressively taken the opposite approach.

In Q4 of 2021, Clover produced $432 million of revenue. Investors were supposed to be upbeat about the insurer’s results since its revenue  grew a great deal year-over-year. However, as usual for Clover, more revenue just produced even bigger losses. The company’s medical cost ratio hit 103%, meaning that it was spending $103 on claims for every $100 of premiums i.e. payments from its customers, that it received. That’s not a good situation.

With all of its other expenses, such as executives’ salaries and interest costs, Clover racked up a jaw-dropping loss of $187 million on its $432 million of revenues. Incredibly, Clover is losing something like 43 cents on every dollar of insurance policies that it underwrites.

Clover provided an adjusted EBITDA figure which excludes some costs that it believes are not very relevant for understanding the overall performance of its business. It also provided a “normalized” adjusted EBITDA figure, which also excludes costs stemming from Covid-19 and other “one-time” events.

Even after excluding all of those costs, Clover’s normalized, adjusted EBITDA still came in at a disheartening -$68 million for the quarter. So any way you look at it, the company is still losing tons of money.

The Verdict on CLOV Stock

Clover board member Chelsea Clinton bought some CLOV stock recently. While that was not a game-changer in any sense, it was better than nothing. And Clover’s ongoing  membership growth might entice a large insurer to acquire the firm.

It seems fairly clear at this point, however, that Clover itself is not capable of operating its insurance business profitably.

In fact,  even after its creative accounting moves, Clover still cannot report positive “adjusted” numbers. As a result, investors should sell CLOV stock on its strength.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.