WTEC Research Note

Warrantech Corp. (WTEC)
By: Richard W. West, CFA

WARRANTECH'S STOCK STRONG IN RESPONSE TO CONTRACT ANNOUNCEMENTS THAT BODE WELL FOR INCREASED REVENUE

SPECULATIVE BUY RECOMMENDATION REITERATED

Since our last Research Note on Warrantech dated January 2, 2002, when the stock was $0.55, the price has increased 47% to its present level of $0.81 and 145% from the $0.33 at the date of our original recommendation on October 22, 2001.

Since our original recommendation, the Company has made several positive contract announcements that have included:

1. Extending its market presence in Southern Peru by signing a three-year contract with Electrosave S.R.L. wherein Electrosave will offer point-of-sale service contracts on all consumer electronic products and appliances.

2. Extended a ten-year relationship with Ultimate Electronics Inc. (NASDAQ:ULTE) for an additional five years.

3. Signed an agreement with Automotive Investment Group, a leading general agent on the East Coast wherein Automotive Investment Group will provide marketing services for reinsurance programs for large automobile dealerships. Based on the current business volume, management indicated that this program could add 25 percent to 30 percent in new business volume for Warrantech Automotive.

4. Announced the appointment of Michael Bailey as President of Canadian Operations. Mr. Bailey's will be responsible for establishing operations in Canada to service Warrantech's Canadian customer base and increasing the company's market penetration for consumer products, home and automotive service contracts and extended warranties throughout Canada.

5. Signed a new five-year agreement with CRES Insurance Services, LLC wherein CRES sill provide a unique risk management package that offers comprehensive protection for home buyers, sellers and real estate agents that will be included in Warrantech's Home Sellers Advantage Program.

We expect increased revenues from these recent contracts in the coming months. This in turn could lead to an increase in our estimates of revenues and EPS for 2003.

Our earnings per share (EPS) estimate is $0.04 for the third quarter ended 12/31/01, to be reported in mid-February. The Company, we believe, is on track to meet this estimate. It is also on track to meet our Q4 estimates of $.04, making our EPS estimate of $0.12 for the year ended March 31, 2002. For the year ended March 31, 2003, the estimated EPS is $0.23, which, as noted above, may be increased as revenues from the new contracts are realized. Based on these current estimates, the stock is now trading at a 6.75x EPS for the year ended 3/31/02 and 3.5x EPS for the year ended 3/31/03.

Even with this recent price appreciation, we believe the common stock of Warrantech is a compelling buy and continues to offer investors an excellent opportunity for long-term capital appreciation with moderate downside risk. We reiterate our Strong Speculative Buy on Warrantech Corporation and maintain our price target of $1.75 for a twelve to eighteen-month timeframe.

J.M.Dutton & Associates, LLC. John M. Dutton, President and Supervisory Analyst, 801 S. Figueroa, Suite 1120, Los Angeles, CA 90017 Phone (213) 929-2616, Fax (213) 896 0457 Email: [email protected] Web site: www.JMDutton.com

Information, opinions or recommendations contained in this research note are submitted solely for advisory and information purposes. The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Such information and the opinions expressed are subject to change without notice. This research note is not intended as an offering or a solicitation of an offer to buy or sell the securities mentioned or discussed. Neither the Firm, its principals, nor the assigned analysts own or trade shares of any company covered. The Firm does not accept any equity compensation. Anyone may enroll a company for research coverage, which costs US $22,000 prepaid for one-year. Reports are performed on behalf of the public, and are not a service to any company. The analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests and insure independence. Please read full disclosure and other reports and notes on the Company at www.JMDutton.com.