I think it was stephen penman in his book accounting for value who talked about the pitfalls of dcf based on fcf. This valuation penalises growth companies for investing and earning excess returns on capital.
He talks about residual earnings which are a function of the return generated on book value which is what an investor needs above the required return which is exactly what value snatcher is talking about.
This book is an excellent book for those who want to learn about how much one should pay for growth .
Buffet also similarly talked about retained earnings test. Best to look at ROIC/ROCE in valuing such companies.
Above I meant dcf valuation.
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