It just doesn't get much more controversial than genetically modified (GM) crops. But for agricultural giant Monsanto (NYSE:MON), they're big business and growing. Today, the company reported a 54% jump in second-quarter net income on a 15% gain in sales.

Scanning the quarterly report, you quickly realize that you've not stumbled upon your ordinary food company. Corn and soybeans aren't driving sales and profits higher. It's corn and soybean traits. Be warned, however: Today's sharp increase in earnings is not necessarily indicative of Monsanto's immediate future.

In fact, the company is looking for around 10% compounded EPS growth for 2005 and 2006, relying heavily on the agricultural chemicals business it is famous for. With the stock trading at 20 times next fiscal year's earnings, 10% growth seems relatively light.

And that 10% growth, by the way, doesn't come cheap to investors or to Monsanto, which is building an expensive biotech moat. The company earned $154 million last quarter and spent $126 million on research and development. Unlike in pharmaceuticals, where leaders like Amgen (NASDAQ:AMGN) enjoy profit margins of nearly 25%, Monsanto's margin is nearer to 10%.

As for free cash flow (FCF), for the fiscal year ending September, the company looks to generate at least $350 million, which pegs the stock at a rich 27 times forward free cash flow. And Monsanto needs the cash to protect its patents. Just recently, the company won an eight-year dispute against Dow Chemical (NYSE:DOW) subsidiary Mycogen, and resolved a patent interference proceeding with Syngenta (NYSE:SYT).

All that being said, even in the midst of a global restructuring, Monsanto has a sound balance sheet and plenty of borrowing capacity. It may be no Amgen -- not yet, at any rate -- but its operating margins are better than competitors Syngenta, BASF (NYSE:BF), and the world's largest seed company, DuPont (NYSE:DD).

In the end, Monsanto has some nice technology and an intriguing product portfolio. Heck, maybe the CEO is being conservative with his long-term earnings projections. Particularly, if you think GM crops are the wave of the future, Monsanto is one to watch as that future unfolds.

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Fool contributor W.D. Crotty doesn't own shares of any company mentioned.