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Why the Estia Health Ltd share price keeps plunging

By James Mickleboro - October 31, 2016 | More on: EHE JHC

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  (ASX: EHE)? The shares of the embattled aged care operator will be on watch today after it emerged that one of its facilities in New South Wales has been flagged over poor standards.
  
  According to a report in the Australian Financial Review a non-compliance notice has been issued to Estia Health by the Federal Health Department after it failed to meet required standards at its Tea Gardens facility.
  
  The report advises that its 68-resident Tea Gardens facility has failed to comply with health and personal care standards. These include areas such as medication management, skin care, continence management, and behavioural management.
  
  With its share price down 63% already this year, Estia Health can ill-afford another scandal hanging over it. But the failure to comply with these standards is both worrying and unacceptable, and not something that I expect will be able to be swept under the rug very easily.
  
  In morning trade Estia Health’s share price has unsurprisingly dropped lower by 1.5% to $2.64.
  
  Whilst the aged care industry is without doubt a tricky area to operate in, one company which I believe is doing a great job at the moment is Japara Healthcare Ltd (ASX: JHC). I was very impressed with its recent AGM and feel there is a long-term investment opportunity in its shares.
  
  Managing director and CEO Andrew Sudholz is very optimistic on the company’s future. He expects the majority of the company’s growth over the medium term to come from capacity expansion, with increasing revenue and earnings coming from bed expansion.
  
  The future looks bright for Japara in my opinion, unfortunately I cannot say the same for Estia Health at this point. So I would recommend investors leave the drama at Estia Health behind and invest in Japara instead.