Empired - Has the Recent Sell-off Offered an Opportunity?

Empired (ASX:EPD) have been on my radar for a while. I have never committed too much time to researching them because they have appeared to be fully valued.

After the recent drop I decided it could be time to invest. The reported PE ratio is 6-7 and revenue is expected to grow. I read through the reasons for the lower guidance and they say it is all one-off in nature. These are situations that sometimes offer investors a cheap entry due to one bad year and then it's business as usual and the SP recovers.

They indicate H2FY16 will be back to normal. This is always something to be careful about as sometimes management overlook reasons for these events. I am always very sceptical until there is sufficient evidence to prove a one-off is in fact a one-off.

In this situation I don't think I will invest just yet. The reasons for the lower guidance include integration of an acquisition and what appears to be poor contract execution. This may not be the case, but I want to see evidence of their EBITDA margins returning back to their reported target of around 8-10%. Once they prove that it was a one-off hiccup I will look further into the company and consider investing. Until then I will watch with interest.