Datalex, First Derivatives and Norkom are the Irish technology stocks that have the most potential to deliver returns for investors, according to Goodbody Stockbrokers.

The just-published Irish Technology Update from analysts Gerry Hennigan and Dan Cavanagh looked at eight quoted technology companies based on the island of Ireland under a number of categories including the strength of their balance sheet, currency exposure, characteristics of their business model and demand for their products.

Six of the companies - Datalex, Horizon, Norkom, First Derivatives, Trintech and Vislink - have either outperformed or performed in line with the FTSE TechMark All Share index of shares.

They identified Nasdaq-quoted Iona Technologies and Belfast manufacturer of high-end digital cameras Andor Technology as "clear underperformers over the recent past".

Goodbody noted that, for the four software companies in the group, margins are higher but revenue is less predictable and the possibility of market disruption from new technology or competitors is higher.

The Goodbody analysts said that Norkom and Datalex had more stable models because they have sought to improve sales visibility. Norkom, which sells anti-fraud software to financial institutions, recognises revenues over the term of a contract. Datalex has moved to charging for its travel distribution software on a per-transaction basis.

First Derivatives, the Newry-based provider of technology services to the financial sector, was singled out for its impressive track record, strong asset backing, healthy demand for its services and likelihood of earnings upgrades.

The report also noted the negative impact of the weak dollar on many of the firms with Iona, Datalex and Norkom the worst affected.