"Any piece of moderately good news may be enough to drive the stock to multi-bagger returns in 6-12 months." -- Zeke Ashton, March 2003

How true. Some good news drove First Horizon Pharmaceuticals (NYSE:FHRX) up 41% to $10 this morning, qualifying the stock as a five-bagger. While sales declined 8.8% to $24.7 million, the company turned a $0.10 a share profit.

But the real story is that trade levels of Sular -- a hypertension drug acquired from AstraZeneca (NYSE:AZN) for $185 million in February 2002 -- fell to 1.1 months from 3.2 months at the end of June, paving the way for future sales.

Talk about buying a dollar for 40 cents.

In August 2002, Zeke Ashton highlighted the company in TMF Select (now Motley Fool Hidden Gems). The once high-flying First Horizon shares had taken an 81% one-day hit, as sales in its Tanafed and Prenate lines fell victim to knock-offs, causing an earnings miss.

At the time, the shares traded at $5.30, giving First Horizon a $152.4 million market cap. At 1.3x sales and 5x free cash flow, Zeke felt that the stock market had overreacted.

By December, the stock had run up to over $7, as First Horizon's CEO Mahendra Shah forecast a better 2003, causing Zeke to note:

"Future guidance doesn't automatically translate into future results. By taking half off the table now, a patient investor might get a chance to average down if the stock takes another dip."

By the end of February, investors got that chance. First Horizon warned again, having underestimated the time it would take to ramp up sales of Sular, an acquisition three times larger than any before it. According to Zeke, the company also "had absolutely no idea how much of the product was in wholesaler inventory channels at any given time." That warning took the stock down to $2.

By that point, First Horizon carried a more sufficient margin-of-safety, causing Zeke to note that the stock was a better bet, though not a sure thing.

But yesterday's report makes clear that the Sular inventory problem has brightened considerably, and that better days are ahead. And back when the stock dirt cheap, First Horizon bought back shares. Even now, there's a case that the stock still looks pretty cheap.

There's an important lesson here: Lots of people can buy a stock at fair value, but it takes some concept of value to buy one for less. And it takes discipline to cash in.

Jeff Hwang can be reached at JHwang@fool.com. Zeke Ashton is a long-time contributor to The Motley Fool, and is managing partner of Centaur Capital Partners, LP.