Is this value dividend stock a falling knife to catch after dropping 20% today?

Burning Question proper size

Epwin Group(LSE: EPWN) found itself sliding in mid-week business after putting the wind up investors with its latest trading details.

The company, which manufactures low maintenance building products, was last dealing 20% lower from Tuesday's close. It is now trading at record lows below 80p per share.

Epwin said sales and operating profits during January-June matched the board's expectations, "despite market conditions, particularly in the key RMI market, remaining challenging." However, it announced that profits for the full year are likely to be "marginally below market expectations."

The Solihull business noted that "materials price inflation has... had an increasingly significant impact upon costs in the period and this continues to be the case." And in response to these problems, Epwin has now started a programme designed to adjust its capacity and cost base.

However, stock pickers elected to take flight after the business advised of problems at two of its customers, each of which account for around 5% of its total revenues. One has significant funding issues and is undertaking a strategic review, while the other has sold its plastic distribution business, which is principally supplied by Epwin, to a competitor of the group, it said.

Rather worryingly, it advised that the implications of these troubles "remain unclear at this stage."

A risky selection

Despite these developments, the chief executive remains positive over Epwin's prospects and said that while the current market conditions continue to be challenging, "we remain confident of the long-term growth drivers in the RMI market and continue to progress with our strategy, focused on operational improvement, selective acquisitions to broaden our product portfolio, cross-selling across our brands and product development."

I am not so convinced however, with the current troubles at Epwin's key clients adding an extra layer of risk to the company's revenues outlook in the near term and beyond.

The City had been expecting earnings to edge just 1% and 3% higher in 2017 and 2018 respectively. But today's profit warning is likely to see these forecasts scythed, making a low P/E ratio of 5.4 times somewhat irrelevant. Meanwhile, bad news from its pressured clients could see more downgrades down the line.

Even though Epwin appears to be a decent dividend pick -- the firm sports yields of 8.8% for 2017 and 9.2% for 2018 -- I reckon dip buyers should give it a wide berth right now.

Dividend diamond

I am far more optimistic on the earnings prospects over at Avon Rubber (LSE: AVON), and reckon the defence star is a particularly handsome pick at current prices.

Although the business is expected to endure a 12% earnings slip in the 12 months ending September, the company is expected to roar back with a 7% advance next year. And forecasts for the upcoming period means Avon Rubber deals on a P/E ratio of just 14.3 times.

This is excellent value, in my opinion, as recovering defence budgets propel demand for the company's high-tech mask units higher, while improving conditions in the dairy industry should also create strong sales growth for its milking products.

On top of this, the City is also expecting dividends to keep marching higher -- last year's 9.48p per share reward is anticipated to rise to 12.3p and 15.3p this year and next, resulting in handy yields of 1.2% and 1.5% respectively. I reckon Avon Rubber is a brilliant buy today.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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