Doing one for a stock pitch for an investment club. Is there any quicker way to do it? Intuitively with the accounts needed for a DCF I could always take the shortcut and project capex as a % of sales and depreciation as a % of capex, but do industry professionals build a full 3 statement model with depreciation/debt/NWC schedule every time they do a DCF analysis(or more specifically, calculating unlevered free cash flow as capex/dep/change in NWC is projected).
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Yes, most people would. You want CFs to be accurate as possible, right? If the company is mature, chances are their given working capital capital ratios are fairly consistent (that would depend, but I am going to say generally). Forecast using these, unless you expect something else.
Of course. To add on to what CMoore0520 said, you will probably not stop at a DCF, making the operating more useful when you start your LBO, merger model, etc.
No, they don't. It really depends on the situation and timeline. It can also depend on your group
If you're doing a quick and dirty DCF valuation analysis (e.g. as part of a pitchbook) using only public information (e.g. company filings, equity research), then often times a full 3-statement operating model is not needed. You can project out the main line items/schedules, use company guidance, use equity research estimates, make general assumptions/flatline (% of sales) etc. When your information is limited, building an overly detailed/complex model can be redundant. Too many assumptions can lead to false precision (garbage in, garbage out.)
If you're working on a more important project or a live deal, then you'll have better, more detailed financial forecasts (e.g. management model, seller model, input from tax advisors etc). In this case, building a 3-statement model is the norm.
That being said, since your project is for school and you likely have the time, I would just build the 3-statement model for practice.
No one has mentioned this but you can also do something in between i.e. revenue + expense building -> forecasted income statement -> DCF.
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