LHR,
What values did you use? Did you just enter the ticker to get $66.90?
If you look at the post I wrote on fortunes 40 best stocks to retire on ACN was on the list and I came up with a value of $35 when it was trading at $29 at the time.
If you are trying to do a DCF with stable companies, you have to consider what cycle of the business it is in. In 2008 every company did terribly but you shouldn't use the 2008 numbers to calculate a fair value. You should normalize the numbers to a normal operating situation because you are looking at a company from an ongoing perspective.
The spreadsheet has a yellow FCF override box in the DCF tab where you can enter your estimate of FCF. A simple way would be to just take the median of the past 5 years and enter that number. It would provide an indication of how it has and may perform.
So to answer your question "Why would there be such a huge difference between Old School's and Morningstar's Fair Value estimation?" it is because using default values won't give you the correct range of results for every single stock. You have to adjust the FCF number, growth and discount rates.
There is a box where I provide the ability to change this very simply.
You can also refer to this article on discounted cash flow I wrote.
Onto the 3 pitfalls.
Cash flow projection.
Not a problem with stable cash flow generators. DCF and any other valuation method is all about knowing what technique should be applied to which company.
Capital Expenditure Projections.
Since I use the entire capex amount rather than trying to estimate the maintenance capex I won't be understating it so not a problem. Will turn out more conservative.
I've written about capex a couple of times.
http://www.oldschoolvalue.com/…..penditure/
http://www.oldschoolvalue.com/…..re-in-fcf/
Discount Rate and Growth Rates
http://www.oldschoolvalue.com/…..unt-rates/
You can see how I apply discount rates and growth rates in this AAPL stock valuation.
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